What are tax-free benefits?
Typically, when you provide your staff with non-cash benefits (often referred to as benefits-in-kind), such as a company car or private healthcare, it’s classed as part of their earnings and taxed accordingly. Your employees will pay income tax and National Insurance on these so-called perks, and as their employer, you’ll be liable for Class 1A National Insurance contributions (NICs).
That said, there are exceptions. Tax-free benefits, as they’re commonly known, range from mobile phones to Christmas parties, and they could be the key to helping you and your employees alleviate some of the financial stress brought on by spiralling living costs. To give your business a boost, here are five popular tax-free benefits to help you beat the cost-of-living crisis.
We all need to plan for our future, and one way to help your employees navigate these uncertain times and enjoy a little more financial security is by making regular contributions to their pension scheme. Under current legislation, you have to pay a minimum amount into an employee’s workplace pension every year (usually 3% of their gross earnings). But there’s no upper limit on what you can contribute and any money you pay into your employee’s pension pot is tax exempt. Some companies even offer pension contributions in lieu of a bonus or pay rise, and with tax breaks on both sides, it’s a great way to reward your staff.
2. Health and wellbeing
A healthy workforce is a happy workforce, and you can keep your employees fit and firing without spending a penny in tax. According to legislation, you can provide each member of staff with a maximum of one health screening assessment and one medical check-up a year, tax-free. The same goes for welfare counselling, which could be extremely important, with so many people struggling with their mental health as a result of the financial crisis. In addition, if one of your employees is absent from work on health grounds for 28 days or more, you can pay up to £500 towards their medical bill without troubling the taxman.
3. Travelling to work
More people are choosing to cycle to work to avoid the traffic, do their bit for the environment or get a little exercise. And thanks to the government’s ‘Cycle to Work Scheme’, you can take advantage of this growing trend and earn tax breaks for you and your employees. By providing staff with bicycles and associated safety equipment in exchange for a portion of their pre-tax salary, you’ll help them save on income tax and National Insurance. In turn, you won’t have to shell out on employer NICs or Apprenticeship Levy – a win-win for both parties.
4. Food and drink
Earlier this year, reports suggested that UK households were facing the fastest annual increase in food and drink prices in nearly half a century. You can go some way to easing the burden of these rising costs by offering your staff free lunches, snacks, water and hot drinks at work. Under government guidelines, you can provide free or subsidised meals to employees, provided certain criteria are met, such as preparing meals on-site or in a designated canteen. Employer-provided meals are tax deductible and often tax and NI-free for your staff.
5. Trivial benefits
Employees are at the heart of any successful business, and to maximise your profitability, it’s important to retain your best and brightest. With the current state of the economy, now is perhaps not the ideal time to be dolling out pay rises and bonuses, but there is a cheaper alternative. Often typified by things like bottles of wine, chocolates or staff lunches, trivial benefits are a great, tax-efficient way to reward staff, inspire loyalty and encourage a positive, supportive culture. To qualify, benefits must cost £50 or less and cannot be in the form of cash or cash vouchers.
Speak to the experts
These are just a few of the tax-efficient ways you can reward and support your staff in today’s volatile economic climate. To learn more about tax-free benefits and how they can help you and your employees save money and cut costs, why not get in touch and speak to one of our experts
Here, at Wisteria, our advisers are always on hand to provide sound advice and innovative solutions to ensure you make the most of your business opportunities. We can help you maximise investment opportunities, retain your best employees and keep your business running as smoothly and efficiently as possible. Get in touch today and let’s discuss what we can do for your business.