We have partnered with global employment platform, Boundless in a unique project exploring the world of employee benefits in the UK. Over this series of bitesize blog posts, you’ll find out the fundamental information you need in order to develop a successful and impactful employee benefits strategy. Click the links to read part 1 and part 3.
In this second “Benefits Explained” article, we look into how the tax regulations impact benefits in kind and how legislation has changed due to the pandemic. As an ever-evolving space, many may be unaware of what they might be entitled to and so this basic summary will help you get started.
Employee perks, also known as benefits in kind (such as a work from home budget), are regarded as taxable income and therefore require additional taxation. Some benefits in kind however are exempt from any additional tax, including (but not limited to):
- Contributions to an approved personal pension scheme
- Some childcare arrangements
- Bicycles and cycling safety equipment
- Work-related training
- Annual Health screening / medical check-up
In addition to these tax breaks, a benefit in kind is exempt if it’s all the following:
- less than £50 in value
- not exchangeable for cash
- not a reward or bonus for doing well in the job
- not something stipulated in the employment contract
- not a ‘salary sacrifice’
There is no limit to the amount of total trivial benefits an employee could receive, excluding directors of closed companies – which is capped at £300 per year.
Due to the rise in flexible working, the lines between work and personal lives have blurred and as a result, employees are now eligible for tax relief on a number of business related expenses, such as home internet connection.
Tax relief is now applicable to the following:
- Employees can claim £6 per week for working from home expenses, which the employers can cover tax-free.
- Any equipment, services and supplies that employees receive from their employer are not subject to reporting or additional tax, as long as they are used for work purposes and personal use is minimal.
- Employees can still receive tax relief, in the event that the company does not cover the cost of work-related resources, as long as it is “wholly, exclusively and necessarily in the performance of the duties of their employment.”
- Employers can reimburse the costs in broadband internet tax-free if the employee requires it to carry out their work.
- The use of work mobile phones for personal reasons is no longer restricted under the new government regulations.
For the full list of benefit-in-kind tax exemptions, check out the article on the Boundless website - here.