Are you worried about that freebies are tax free or not?
Well, this is a question in minds of many people. The funniest part is that while using companies’ phone or enjoying the incentives people are thinking about only one thing and that is about paying taxes. Let’s start with the basic, it is very important to understand what mobile phone freebies are and how they can be taxable?
Freebie marketing, also popular as the razor and blades business model, is a business model wherein one item is sold at a low price or given away for free in order to increase sales of a complimentary good. The process of freebie marketing differs with marketing requirements. So, you can have benefit from the freebies and mobile phone incentives that are offered to you by your company or the member company associated with it.
Another important aspect is why companies offer you such incentives? It’s all the rage for phone companies to offer incentives to stay with their target group of customers. The prime examples of these incentives are O2’s moments and orange’s free cinema tickets. The companies link with other businesses to give their customers discounts in shops and restaurants etc. There is only one trouble and that is the taxman takes a keen interest in benefits received in connection in the specific person’s job. Well, you must be aware about the benefit-in-kind, which you will receive through these incentives.
It has general rule and that is where a director or employee receives a benefit-in-kind (BiK) as a result of their employment and this will count as income for tax purposes. However, it doesn’t matter whether they receive the BiK directly from the company or from another business which has with their business, in all of the cases the result will be a tax bill. There are some necessary tips that can benefit you in case of gifts or a meal out at a restaurant paid by the company the small value gifts means gifts that value less than £ 250 in total will count in any single tax year.
The tax and NI exemption only applies where the goods value is less than £ 250. For example, if the value of the free or discounted goods was £ 255 during a tax year then you would be liable to pay tax on the full amount. Phone companies are providing you an option to take advantage of discounts, free tickets among many other services and not the actual goods. So, you do not have to confuse yourself in this regard. In the end the good news is that you can enjoy some freebies from your phone contract without getting clobbered with a tax bill.