The remuneration of most employees will comprise of a package that includes both salary and ‘benefits’. Whilst salary is usually taxed before it is paid, ‘benefits’ are generally assessed separately and you should understand if a benefit is taxable, and if so, its taxable value?
Common types of taxable benefits provided to an employee are:
- Private Medical Insurance
- Health Cashplans
- Critical Illness Insurance
- Gym Membership
- Income Protection Insurance (aka Permanent Health Insurance or ‘PHI’)
- Dental Insurance
- Travel Insurance
- Company cars
- Private fuel
- Cheap or interest free Loans
- Private Phone Use – private home phone bills, including rental charges, which are paid for by the employer will be taxed as a benefit
- Any living accommodation provided, unless job related
Employers are required to notify HMRC of taxable benefits provided to employees by completing a P9D or P11D form annually and the full amount of any benefit or reimbursed expense must be reported. Most reimbursed expense payments can however be ignored when completing P11Ds as a dispensation for these is usually obtained from HMRC.
Employees should receive their P11D statement from their employer by 6th July following the end of the tax year which details the total value of any taxable benefits paid. HMRC then issue a tax coding notice to the employee confirming their Personal Allowance less any taxable benefits. This means that any tax due on the benefits is collected via salary during the course of the next tax year. This means that any tax paid on these benefits will in effect be paid at the employee’s highest rate of income tax.
Employee don’t usually pay National Insurance Contributions (NICs) on their benefits however nearly all benefits are subject to employer’s National Insurance at a rate of 13.8% of the taxable value of the benefit.
Some benefits are not taxable, the most notable of these being:
- Employer paid Pension Contributions
- Group Life Assurance (Death-in-Service Cover)
- Health Screenings
- Access to retail discount schemes
- Childcare Vouchers
- Bicycles or cycling safety equipment
- Meals provided in a staff canteen & Meal Vouchers
- Employer-funded or reimbursed training
- Long-service awards
- Employee Assistance Programs (EAPS’s) & counselling
- Parking provided at or near an employee’s place of work
- Workplace nursery places provided for the children of employees
- Additional household costs incurred by an employee who works at home
- Removal and relocation expenses (max £8,000 per move)
- Provision of a mobile phone
- Annual social functions for employees (up to £150 per head)
- Trivial benefits in kind costing less than £50
For more information on benefit schemes and/or our Wingate Plusyou benefit platform please contact the corporate team on 0844 406 0027
All statements concerning the tax treatment of products and their benefits are based on our understanding of current tax law and HM Revenue and Customs’ practice. Levels and bases of tax relief are subject to change. This is information is not provided as advice or a recommendation.