Ten common non-taxable payments and benefits you might not be aware of
If you’re an employer and provide expenses or benefits to employees or directors, you might need to tell HM Revenue and Customs (HMRC) and pay tax and National Insurance on them. Examples of expenses and benefits include:
- company cars
- health insurance
- travel and entertainment expenses
There are different rules for what you have to report and pay depending on the type of expense or benefit that you provide; HMRC have more details here.
To help you find your way through all this, here's a summary of 10 payments and benefits which aren't taxable as benefits in kind;
- Late-night taxis). The cost of a late-night taxi provided by an employer to an employee for a journey from work to home will be exempt if the employee is required to work later than usual and until at least 9pm, this occurs irregularly, and by the time the employee stops work, either public transport has ceased or it wouldn’t be reasonable to expect the employee to use it. If an employee’s journey home requires taking two or more forms of public transport and one of those has stopped by the time of the journey home, the condition is satisfied for the whole journey so the expense would be exempt.
- Free or subsidised meals provided on the employer’s business premises, or in any canteen, are exempt on condition that meals are on reasonable scale, are provided for the staff generally and either all employees may obtain free or subsidised meals or the employer provides free or subsidised meal vouchers for staff for whom meals aren’t provided.
- Mobile phones and smartphones provided by the employer for solely business use, with insignificant private use, is tax exempt. The contract needs to be in the employer’s name. However, money paid by an employer to an employee to use their own mobile phone is taxable. The exemption applies to mobile phones and smartphones and it does not extend to iPads, PDAs and tablets.
Please note: All values and amounts are correct as of the time we published this; please contact us if you're not sure of the correct amounts to use.
- Home working allowance up to £4 per week, £18 per month/ £216 per year is automatically exempt and no supporting evidence of the cost is required. If the employer pays more, then they must either retain supporting evidence to show that the payment is in respect of additional household expenses or seek an arrangement with HMRC whereby they can pay a higher amount without a need to retain supporting evidence.
- Pensions (and others) expenses provided on retirement or death. Expenses incurred in the provision of any pension, annuity, lump sum, gratuity or similar benefit to the employee or to any member of the employee’s family or household on the employee’s retirement or death are exempt. Also the provision of pensions’ advice to the employee up to £500 is exempt. This includes general financial and tax issues advice provided that the advice is available to all employees generally. Employers can limit provision of the advice to employees who are nearing retirement or who are about to retire on ill-health grounds as long as the advice is available to all employees in the same situation.
- Trivial benefits - any benefit costing less than £50 will be exempt provided that: the benefit is not in the form of cash or a cash voucher, the employee is not entitled to the benefit as part of a contractual obligation (including under salary sacrifice) and the benefit isn’t provided in recognition of particular services performed by the employee as part of their employment duties (or in anticipation of such services). For a close company the benefit provided to an individual who is a director or other office holder of the company (or to a member of their family or household) the exemption is capped at a total cost of £300 in the tax year.
- Work-related training expenses - training delivered as full-time or part-time and either provided internally by an employer or run externally by a third party are exempt. The tax exemption also covers related costs such as: travel and subsistence expenses, incidental overnight expenses, additional childcare expenses, costs that relate to examinations and registration of qualifications, costs of distance learning aids such as practical course materials and books.
- Travelling and subsistence expenses following strike disruption - reasonable travelling and subsistence expenses owing to the dislocation of public transport by strikes or other industrial action are exempt. The exemptions apply to hotel costs or other overnight accommodation cost or extra expenses incurred in travelling to and from work.
- Incidental overnight expenses - payments for personal expenditure, on incidental overnight expenses during a business journey, up to certain limits may be paid tax free. The maximum amount that an employer may pay tax free are £5 per night for overnight stays anywhere within the UK, and £10 per night for overnight stays outside the UK.
- Health screening and medical check-ups - the expenses incurred in providing employees with one health screening and one medical check-up per year are an exempt benefit. Eye tests are exempt if they are required by health and safety legislation for employees who use a computer or other screen. The exemption also covers glasses or contact lenses if employee uses a visual display unit (VDU) for their work.
Medical treatment provided to an employee working overseas is also exempt, provided that the employer has committed in advance to cover the cost.
Also if an employee was absent from work because of an injury and ill health for at least 28 consecutive days, the cost up to £500 of medical treatment to return to work is exempt.