The top tax-effective benefits to offer employees
Fortuous • March 31, 2023
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.
For example:
- 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.
- Life insurance cover – Death in Service cover can be provided for your employees, and will normally be tax free, both the insurance premiums paid and any claims paid.
- 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.
Talk to us about reviewing your employee benefits.
The post The top tax-effective benefits to offer employees appeared first on Fortuous.
Selling your business is a big decision. If you’re incorporated as a limited company, you’ll usually be faced with two choices for how to structure this sale. You can choose between: Both routes have their own distinct tax outcomes. Having a good understanding of these implications is extremely important before you make a decision on […]
The post Selling your business: what are the tax implications? appeared first on Fortuous.
Making Tax Digital is changing how we submit tax returns. And with Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) coming into force from April 2026, it’s time to start planning how you’ll meet the compliance requirements for MTD for ITSA. We’ve highlighted the four main areas where you need to take […]
The post What is Making Tax Digital for Income Tax Self Assessment? appeared first on Fortuous.
Keeping up-to-date records of your business transactions isn’t the most glamorous part of being an entrepreneur, that’s for sure. But, in reality, having accurate and up-to-date bookkeeping is actually one of the core ways to keep your finances (and your business) under control Digital bookkeeping is the future of your finance The digital age has […]
The post Getting your bookkeeping ready for a digital future appeared first on Fortuous.
When selling your limited company, you want to do so in the most tax-efficient way possible. Making use of the Substantial Shareholding Exemption (SSE) is one way to do this. Let’s dive in and see how the SSE limits the corporation tax you pay on any capital gains. Why should I consider the Substantial Shareholding Exemption when […]
The post How does the Substantial Shareholding Exemption help your business sale? appeared first on Fortuous.
A business mentor can provide guidance and support, so you make the right decisions and stay focused on the end goal as a business owner. They can also help you move forward in your career by providing advice and feedback on what steps to take to reach the pinnacle of success. But have you ever […]
The post Why your accountant is the mentor you didn’t know you needed appeared first on Fortuous.
Having proper control of your business finances is a big advantage. It helps you make well-informed business decisions and keeps your organisation profitable. With so many digital tools for managing your bookkeeping, accounting and management reporting, it’s never been easier to manage, track and forecast your financial position. But what are the main tools you […]
The post 5 ways to get in control of your business finances appeared first on Fortuous.
Whether you’re selling or buying, it’s important to make sure that any VAT invoices you issue or receive comply with the strict VAT regulations. Failing to do so can cause problems both for you and for your customers. If you reclaim VAT using a defective invoice, HM Revenue & Customs (HMRC) can disallow the claim. […]
The post What should be on a VAT invoice? appeared first on Fortuous.
Did you know that the UK corporation tax rates are changed from April 2023? From 1 April 2023, the rate of corporation tax changes from 19% to a variable rate between 19% to 25%, depending on the profits made by your business. This could mean a change to what you will owe in tax for the […]
The post New UK corporation tax rates from April 2023 appeared first on Fortuous.
The days of deciding on a tax planning at the start of the year and then forgetting about it are gone. As taxpayers and tax advisers, we both have to be nimble, flexible and aware of changes. That’s why regular tax-planning sessions are so important. The need for regular tax-planning conversations As your accountant and […]
The post Book a tax planning conversation with us today appeared first on Fortuous.
Are you self-employed? Or are you a partner in a trading partnership? If you are, you should be aware of the proposed changes to the tax basis period for unincorporated businesses. HM Revenue & Customs (HMRC) is proposing to change the way that unincorporated businesses are taxed, moving from a ‘current year’ basis to a ‘tax […]
The post Change of Tax Basis Period for unincorporated businesses: are you ready? appeared first on Fortuous.