Benefits in kind

Treat your team to keep them keen

Remuneration by way of benefits in kind can be an attractive option to both employers and employees, especially those paying higher or additional rates of income tax. Benefits in Kind are specifically non-cash benefits that are subject to less tax, if not tax-free. We will help you to choose the best options for rewarding your team in the most tax-efficient manner for you.

Non-taxable benefits in kind

There are several benefits that are not normally taxable, as long as they are not provided in return for a reduction in salary. These include:

• Contributions to registered pension schemes (salary sacrifice acceptable)
• Parking facilities at or near the workplace
• Childcare vouchers worth up to £55 a week or £243 a month for basic-rate taxpayers (This scheme is no longer available to new entrants. You may be eligible for tax-free childcare instead)
• Compensation/termination payments up to £30,000
• Welfare counselling services
• Staff canteen and dining facilities
• Sports facilities
• Relocation expenses, up to £8,000
• Long-service awards (provided they are an established practice with the firm or are in the employees’ contracts)
• Use of a pool car
• Use of an employer-provided mobile phone
• The provision of representative accommodation (except for certain directors)
• Approved share incentive plans
• Annual parties, such as a Christmas party, or similar functions costing up to £150 per head per annum
• Retraining expenses and courses

If you operate a PAYE scheme you may want to review the government’s 2020/21 Employer’s Further Guide to PAYE and NICs for more details on which benefits attract tax and National Insurance.

Trivial benefits

Making your staff feel special can be simple and inexpensive. Trivial gifts, such as wedding or Christmas gifts, or gifts on the arrival of a child or other personal event, are exempt from tax up to a value of £50 per gift.

You can also use the exemption to provide annual flu vaccinations for staff and other similar arrangements, provided the benefit is not a voucher exchangeable for cash or a reward for doing their job. Many employers now take the opportunity to provide retail vouchers as gifts for employees at appropriate times.

A cash benefit, or a cash voucher however, is always taxable irrespective of value. And directors are further subject to an annual cap of £300 on gifts to themselves or employees who are members of their family.

We will help you to choose the most appropriate and tax-efficient approach to employee remuneration, delighting your staff and improving the profitability of your business.

If you’re interested in more information on the tax treatment of employee benefits, download our factsheet A New Approach to Employee Benefits.