Most employees are offered a range benefits from their employers. There is a huge variety of employee benefits, all with different tax and national insurance (NI) implications. So, as your local accountants, we have created a simple guide to make you aware of any tax conditions as not all employee benefits may be what they seem.

Benefits can be very complicated to understand, as some benefits, such as cars, are provided over a number of years, you need to know how the associated tax bill may change in the future.

Tax-free benefits

Below is a list of the most common benefits used which are all tax and NI free if all the conditions are met.

• Benefit provided - Principle conditions applying per employee
• Mobile phone - 1 phone, employer must retain ownership contract with telecoms provider
• Bicycle and safety gear - Employer must retain ownership
• Parking - At or near workplace
• Meals and refreshments - Made available to all employees in staff canteen
• Eye test and spectacles or lenses - Required for working with computer screens
• Medical treatment - Up to £500 per tax year as part of a return to work plan
• Health screening - 1 per tax year
• Trivial benefits - Non-cash, worth up to £50 per gift, capped at £300 per year for directors of the employing company
• Pension contributions - Within annual allowance limits
• Relocation expenses - Up to £8,000 per move, if connected to change of job

• Works bus - Used only or mainly to transport employees

Pension contributions

If your employer has staged in for auto-enrolment and your annual salary is above £10,000 you should automatically be enrolled into a pension scheme.

Your employer’s contributions into that scheme are free of tax and NI, if the total pension contributions paid in don’t exceed your pension annual allowance. The allowance is set at £40,000, but if you are over 55 and have flexi-accessed your pension fund the amount you and your employer can contribute is £4,000 per year.

If your total income is £150,000 or more your contributions is tapered to £10,000 per year, therefore you will need to monitor all contributions into any pensions held in your name.

Salary Sacrifice

A salary sacrifice is a benefit arrangement where you give up some of your salary in return for benefit. Such arrangements can save you and your employees money, if the benefit provided is one which is tax or NI free from the table above.

The government is changing the rules so the tax and NI savings disappear in many salary sacrifice arrangements. The new rules will apply to new salary sacrifice arrangements entered into from 6 April 2017 onwards.

All salary sacrifice arrangements involving cars, vans, fuel, accommodation and school fees will come under the new rules from 6 April 2021. Other benefits, such as car parking near work, will fall under the new salary sacrifice rules from 6 April 2018.

Some benefits won’t be affected at all, and these include pension contributions, subsidised meals and medical treatments.

Company cars

The taxable benefit of a company car is based on the list price of the vehicle when new, multiplied by a percentage derived from its CO2 emissions rating.

The lower the CO2 emissions, the lower the percentage, which means a smaller taxable benefit. However, the list price percentage will generally increase each year, meaning you pay more tax each year on the same car.

From 2020 hybrid and electric cars will be taxed at lower levels, if the electric engine sustains a longer range. A hybrid with a range of 130 miles or more will be taxed as if it was a purely electric car.

If you would like us to take the headache out of employee benefits call us on 01932 22 55 33 or email us at info@jisaccounts.co.uk