With particularly complex rules, getting the tax on employment benefits right for directors and employees can seem like a minefield. In this article we summarise the main benefits that we come across and discuss the tax treatment.
Overview
- Non-cash benefits: These are known as benefits in kind and can include things like company cars, mobile phones, and gym memberships.
- Tax and National Insurance Contributions (NICs): Some benefits are tax-free, but others may attract tax and NICs. Employers need to report these benefits to HMRC, typically using the P11D form, though changes are expected from April 2026.
Key Tips
- National Insurance: Employees generally don't pay NICs on benefits, but employers do, with rates increasing from 13.8% to 15% from April 2025.
- Provision of Benefits: The method of providing benefits (direct provision vs. reimbursement) can affect tax and NICs.
- P11D Changes: From April 2026, most benefits will need to be reported through payroll software.
- Double Cab Pick-ups: From April 2025, these will be treated as cars for benefit in kind purposes.
Taxable Benefits
- Employer-provided cars: Taxable value depends on the car's list price and CO2 emissions.
- Private fuel: Separate charge unless the employee reimburses all private mileage.
- Vans: Flat rate benefit charge applies, with a nil rate for zero-emission vans.
- Cheap or interest-free loans: No tax if the loan is under £10,000.
Non-taxable Benefits
- Annual parties and social events: No tax if certain conditions are met.
- Workplace childcare facilities: No tax if specific tests are met.
- Parking at or near the workplace: No tax for employer-provided parking.
- Meals in workplace canteens: No tax if available to all employees.
- Welfare counselling services: No tax for services like stress or debt counselling.
- In-house sports facilities: No tax if provided directly by the employer.
- Retirement benefit schemes: No tax on employer contributions to registered pension schemes.
- Mobile phones: No tax for one mobile phone per employee.
- Homeworking allowance: No tax for contributions towards additional household expenses.
- Job-related accommodation: Limited exemption for specific roles.
- Relocation expenses: Exemption for certain costs up to £8,000.
- Trivial benefits: No tax if the benefit costs £50 or less and meets other conditions.
Conclusion
Getting the tax right on benefits can be complex, and it's essential to understand what is taxable and what is not. Our factsheet summarises the key issues to be aware of but if you have any specific questions about the content or need further clarification, please do get in touch.
