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May 30th 2019

Common tax-exempt benefits

Preparation of the annual employee benefit forms (P11d) is in full swing, but there are a number of employee benefits that are non-taxable, and therefore do not need to be reported to HMRC on the P11d. Here are some examples: -

Parking provided to employees at or near the place of work;

Christmas or other annual party, provided that they are open to all staff generally, and the cost is no more than £150 per head in total;

Electricity provided for charging electric company cars and vans;

Employer pension contributions, even if they are in excess of the compulsory contribution rates;

Gifts, provided the gift is not cash or a cash voucher, and that it costs the employer less than £50;

Discounted goods, e.g. staff discount scheme, are tax-free, provided that the amount paid by the employee is at least equal to the cost to the employer;

Home working allowance – employers can reimburse for additional household expenses (e.g. utilities) incurred by an employee who is required to work from home. Amounts up to £4 per week, or £18 per month, are automatically exempt without proof of expenditure required by HMRC;

Incidental overnight expenses – up to £5 per night for each night away on business journeys in the UK (£10 per night for overseas travel) can be paid to an employee, tax-free;

Mileage allowances for business use in the employee’s own vehicle – cars and vans are up to 45p per mile for the first 10,000 miles, then 25p per mile thereafter; motorcycles are 24p per mile; bikes are 20p per mile. If the employee is required to take one or more other employees in their vehicle on business travel, an additional 5p per mile can be paid to the employee without income tax or National Insurance being incurred;

Mobile phones – but if there is private use of the phone(s), the non-taxable status is limited to one phone per employee;

Long service award – gifts (excluding cash) worth up to £50 per year of service, for employees with a minimum of 20 years of service, unless the employee has had a similar award in the previous 10 years;

Removal expenses – if you are recruiting an employee who does not live in the area, you may be able to pay up to £8,000 of their relocation costs, tax-free;

Staff canteen – free or subsidised meals are tax-exempt, if provided to all staff generally, and on the business premises (but not to hotel or restaurant staff if served at the same time and place as customers);

Suggestion schemes

  • encouragement awards, for example if an employee makes a suggestion for the business, or you wish to reward an employee for special effort, you can make a tax-exempt payment of up to £25, provided that certain conditions are met; and
  • financial benefit awards, for example if an employee makes a suggestion that will either make money or save money for your business, a tax-exempt award of up to £5,000 may be made, again, subject to meeting certain conditions.

The above covers some of the common tax-exempt benefits, where neither income tax nor National Insurance would be due by either the employer or employee, but do bear in mind that benefits in excess of the tax-exempt thresholds, or that don’t meet the specific conditions, will result in additional reporting requirements, e.g. payroll, and/or annual P11d forms.

If you are ever in doubt, you should double-check the tax status with us!

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