Tax Effective Benefits in Kind
Offering benefits-in-kind to your staff is a great way to make your business an attractive place to work. And these benefits add even more value if they’re also either tax-effective or tax-free.
You can offer certain concessions that make benefits provided to your employees (including directors) either low-tax or no tax. To be clear, we’re talking here about general employee benefits, not higher-value items such as company cars or share options etc.
Under certain circumstances, these general benefits-in-kind (BiK) become taxable if they’re provided as part of a flexible salary sacrifice system. But let’s look at the kinds of benefits you can offer – and the avantages they have for your employees.
The top tax-effective benefits to offer your team
If you want to offer employee benefits, but don’t want these BiK to end up attracting significant tax penalties for the employee, there are several useful benefits to consider.
- Gifts of £50 or under – gifts not exceeding £50 can be given to employees without any tax or National Insurance charges arising. The cost is tax-deductible by the company. The gift must not be related to any work achievements, must not be money, must not be a contractual entitlement and, for directors, the total must not exceed £300 per annum.
- Annual staff functions – annual functions, such as the yearly Christmas party or team summer barbecue, can be given to employees, provided the total cost per person during the year doesn’t exceed £150 per guest, including VAT.
- Work mobile phones – a single mobile telephone can be provided to each employee together with the associated line rental and call charges, with no personal tax charge for any private use.
- Free staff meals – free meals can be provided on company premises or in a staff canteen, provided that it’s on a reasonable scale.
- Employer pension scheme contributions – as an employer, you can contribute (sometimes, have to contribute) to employee pension funds, within certain annual and lifetime limits. Topping up your employee’s contributions helps to increase the overall benefit of the mandatory work pension scheme.
- Health and medical check-ups – one health-screening assessment and one medical checkup per annum can be provided to each employee. This doesn’t cover full medical insurance, and also doesn’t generally cover medical treatment.
- Eye tests and glasses – eye tests and glasses/spectacles can be provided tax-free, as long as they’re required as a result of using a screen or visual display unit for work.
- Welfare counselling – counselling can be provided to your employees free of tax, but this doesn’t cover medical treatment, legal, tax or financial advice. However, debt counselling is covered.
- Business mileage – where your employee uses their own car for business travel, that business mileage can be reimbursed at a rate of £0.45/mile for the first 10,000 miles in a tax year and £0.25/mile thereafter.
- Home-working allowance – you can pay an allowance of £6/week (£26/month) to employees who are required to work from home.
- Private gyms – gym facilities can be provided to your employees and their family members, as long as the gym premises are not available to the general public.
- Staff suggestions – rewards for making innovative business suggestions can be paid free of tax, as long as the amount doesn’t exceed £25. If an employee’s suggestion is implemented, a further award, linked to a proportion of the financial benefit to the company, can be made, subject to a cap of £5,000.
- Long-service awards – you can offer a long-service award to a member of staff after a minimum of 20 years’ service. There must be at least ten years between awards that are made and the award has to be articles rather than cash. The overall cost can’t exceed £50 per year of service.
You can find out more details on the many available employee benefits-in-kind on the Expenses and benefits: A-Z page on the HMRC site.
If you provide a range of attractive tax-effective benefits to your employees, this goes a long way to creating a more satisfied, happy and productive workforce.
Many of the rules around employee benefits are complex and difficult to calculate, so it’s well worth talking to us about your benefits plans and where we can offer advice. We can walk you through the available options and show you the tax implications for your team.