Tax Free Benefits
Tax-Free Benefits – A guide for Employers
This guide is only relevant if you are a registered employer and pay your employees through PAYE. A sole director on a minimum salary would also qualify for these benefits.
You are able to provide the following tax-free benefits to your employees that are paid under PAYE (note, this doesn’t include freelancers). As usual though, there are strict conditions and criteria, not all of which are covered below. Please check with us before providing any of these benefits to staff to confirm whether you meet HMRC requirements.
An employer can provide an employee with any combination of the following benefits completely free of tax and NICs:
| Tax-free benefit | Conditions |
| One mobile phone | The phone must be owned by the company and the invoices must be addressed to the company. |
| Equipment - such as computers and laptops | If you can justify it is necessary for them to perform their job properly. |
| A bicycle with safety equipment | Providing employee uses it for work or getting to and from work. The employer can reclaim VAT and obtain capital allowances on the cost. |
| Refreshments | May be provided on a reasonable scale during working hours. |
| Lunch at work | At your own premises or a canteen, but cannot be at a restaurant or café. Must be made available to all employees. |
| Travelling expenses to temporary workplace, not your usual work place | This is a complex area so please ask if you would like to claim this. |
| Subsistence costs when travelling on business | May be reimbursed when incurred during the course of business travel. Receipts must be kept. |
| Annual parties and functions | Strictly capped at £150 inc VAT per employee per year. If you go over this amount the whole amount is taxable. |
| "Trivial" gifts | The gift must be less than £50 and cannot be cash. For directors trivial benefits are capped at £300 per year. |
| Round sum overnight allowances | To reimburse incidental costs when travelling on business. £5 per night in UK, £10 per night abroad. |
| Free vehicle parking at work | Vehicle must be parked at or near the employer's workplace. |
| Interest-free borrowing beneficial loan | Maximum loan of £10,000 per year. But note that the company will pay tax at a rate of 25% on the loan if it is unpaid 9 months after the year-end. |
| Employer contributions to company or employee’s own pension scheme | The employer can make pension contributions on the employee's behalf, within certain limits. This is a complex area so please ask if you would like further information. |
| Pensions advice to value of £150 | An employer can give up to £150 of free advice on pensions to an employee. |
| Recreational benefits | Free or subsidised membership of employer facility or one shared with other employers. |
| Childcare vouchers, or a workplace nursery | £55 per week; restrictions for new schemes and higher earners. Must be available to all employees. New childcare voucher scheme coming in April 2017. |
| Training and course fees | Tax-free if employer provides for job-related training. No tax deduction if employee incurs cost. |
| £6 per week for home working | For employees who have a home working arrangement. Alternatively, employer may reimburse actual expenses of working from home. |
| Medical and optical check-ups | General check-ups as part of employer policy. |
| A pool car | This is for a pool car. It must be available to use for all employees and not for sole use by one employee. The car can’t be kept at the employee’s home overnight and must be left at the employer’s premises. This is a complex area so please ask if you would like to claim this. |
| Relocation expenses | Up to £8000 can be reimbursed. |
| Reimbursement of travel costs when coming to work in the UK | For non-UK-domiciled individuals to encourage them to come to the UK |
| £2,000 of shares | A share award of £2,000 worth of the employer company's shares may be given tax-free to any employee shareholder who qualifies under s 205A ERA 1996 |