Providing your employees and directors with a variety of benefits can be a great way to make them more comfortable, helping you to recruit and retain the best talent for your business. The problem is that staff perks classed as a ‘benefit in kind’ will result in your employee paying tax on their equivalent value – which might not be that appealing!

Fortunately, as an employer there are also non-taxable benefits that you might be able to offer your staff. In this article we go over some of the most common options.

What employment benefits are free from tax?

Providing non-taxable benefits to your staff means you won’t need to pay employer’s National Insurance contributions on their value, and your employee won’t need to pay tax on them. As ever with anything tax-related, the rules around what you can offer as a tax-free perk are rather strict, so we’ll explain the conditions you’ll need to meet.

Childcare: Vouchers or a workplace nursery

This is a tricky one because the rules changed in 2018, so you can continue providing childcare vouchers to staff already receiving them before the change, but can’t add new people to the scheme.

Employees might instead be able to get tax free childcare or free childcare depending on where they live, the age of the child, and how many hours they work.

Cycle-to-work scheme

This is classed as a salary sacrifice scheme, where employees ‘sacrifice’ part of their earnings in exchange for buying a bike or cycling equipment. Because your employee is putting up some of their salary before tax, there’s less income to actually pay tax on (which also means less employer NICs for you to pay – bonus).

Entertainment: Staff parties

You can put on a bit-of-a-do for your staff without it costing them anything in tax – and you’ll be able to claim tax relief on the party’s expense too, but only if it:

• Is open to all members of staff
• Is an annual event, like the Christmas do or a summer barbecue
• Costs less than £150 per person (for the tax year)

Health: Wellbeing and check-ups

Helping your employees take care of their health and emotional wellbeing can also be a tax-free benefit.

This could be access to a counselling service which is available to all staff – although this doesn’t include advice or treatment. You can also provide up to one health screening assessment and one medical check-up each year. The rules around paying for medical treatment are a bit more complicated, so have a chat with your accountant if you’re not sure.

Meals: Free or subsidised meals for staff

You can provide employees with free (or subsidised) food, or use a ticketing system which allows staff to get them, but only if:

• Meals are provided on your business’s premises or in the staff canteen
• They’re available to all staff

Mobile phones

You can provide an employee with one tax-free mobile phone or SIM card as long as the contract is between you and the supplier. You can provide additional phones but these won’t be exempt from tax (although you can choose which one). Just be aware that this doesn’t include other devices such as tablets.

Rewards: Long service awards and suggestion schemes

That employee who’s worked for you so long that they’re part of the furniture can receive a tax-free award for their loyalty as long as they’ve worked for you for at least 20 years and haven’t received a long-service award in the last 10 years. The value of the award is capped at £50 per year of service.

You can also reward employees for good suggestions, special effort, or ideas which improve the efficiency and effectiveness of your business. Again, the rules and amounts are a bit complicated, so chat with your accountant or double-check with HMRC.

Vouchers

Each employee can receive up to £50 in vouchers each tax year, as long as the voucher can’t be swapped or sold for cash.

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