Tax Free Benefits
Overview 📘
This guide applies if you are a registered employer and pay your employees through PAYE. A sole director on a minimum salary can also qualify.
Employers can provide certain tax-free benefits to employees without tax or NIC charges. Strict conditions apply, so always confirm with us before providing these benefits.
✅ Benefits Exempt from Tax and NICs
| Expense/Benefit | Criteria for Tax Free Exemption |
|---|---|
| Assets Made Available to an Employee | If the asset (e.g. laptop) is provided solely for business use and any private use is insignificant, it may be exempt from tax. |
| Bicycles and Safety Equipment | Exempt if mainly for qualifying journeys such as commuting. Employers can reclaim VAT and claim capital allowances. |
| Business Travel Mileage for Employees’ Own Vehicles | Approved mileage allowance payments (AMAP): 45p/mile for first 10,000 miles, 25p/mile thereafter. |
| Clothing | Uniforms (including a visible logo) or protective clothing necessary for the job are usually exempt. Everyday clothing, even if required for work, is not. |
| Company Cars and Fuel | Usually taxable. Could be exempt if a genuine pool car used only for business, available to all employees, and kept at workplace overnight. |
| Counselling for Employees | Certain welfare counselling services (excluding legal, tax, or financial advice). |
| Entertainment | Annual functions exempt if cost is more than £150 per head per year (including VAT). Over this, the full amount is taxable. |
| Homeworking allowance | Payments to employees working from home can be exempt if they cover additional household expenses incurred due to work. Alternatively a flat rate of £6 per week or £26 per month can be paid. |
| Incidental Overnight Expenses | Employers can pay up to a certain limit per night tax-free to cover incidental expenses when employees stay away overnight for work. £5 per night in the UK or £10 per night overseas. |
| Internet | Exempt only if the internet service is provided under a new contract in the employer's name and is supplied wholly and exclusively for the necessary performance of the employee's duties. Reimbursement of an existing private contract is taxable. |
| Loans Provided to Employees | Small loans up to £10,000 in a tax year can be exempt from tax. |
| Meals and Refreshments | Free or subsidised meals provided in a staff canteen are typically exempt if available to all employees. Refreshments may be provided on a reasonable scale during working hours. |
| Medical or Dental Treatment and Insurance | Generally taxable, but certain health screenings and check-ups paid by the employer can be exempt. |
| Mobile Phones | One phone per employee is exempt, provided the contract is in the company’s name and is paid directly by the company |
| Parking Spaces | Providing parking facilities for employees at or near their workplace is generally exempt. |
| Pension Advice | An employer can give up to £500 of free advice on pensions to an employee |
| Pension Contributions | 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. |
| Relocation Costs | Qualifying relocation expenses up to £8,000 can be exempt if they meet specific criteria. |
| Staff Suggestion Scheme | £25 tax-free for a suggestion and up to £5k tax-free if financial benefit is achieved by an employer. |
| Subscriptions and Professional Fees | Fees and subscriptions to approved professional bodies necessary for the employee's work are typically exempt. The body must be on 'list 3' |
| Subsistence Costs | May be reimbursed when incurred during the course of business travel. Receipts must be kept. |
| Training Payments | Costs for work-related training courses paid by the employer are usually exempt from tax. |
| Travel Costs | This is a complex area so please ask if you would like to claim this. Generally speaking, travel costs are only exempt for journeys to a temporary workplace. |
| Trivial Benefits | Non-cash benefits costing £50 or less, not provided in recognition of work done, and not part of the employee's contract, can be exempt. |
| Vouchers | Cash vouchers are taxable; non-cash vouchers may be exempt if they meet specific conditions, such as being for trivial benefits. |
| Workplace charging facilities for electric vehicles | Must be dedicated charging points at premises controlled by the employer and offered to all employees in general or at that location. |
For a full list of expenses and benefits see the link below, but not all of these are tax free.