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Business Tips

Payroll – Tax Efficient Benefits in Kind

If you pay a salary to an individual on the payroll, they will be liable to tax and National Insurance on the gross amount paid to them.

Similarly, most benefits provided are also liable to tax and National Insurance.  This is an avoidance mechanism to prevent employers providing benefits instead of ‘money’ and thereby avoiding tax.

Therefore such benefits are not particularly tax efficient.  Examples include gym membership, company cars, private medical insurance or accommodation.


There are however a number of benefits which can be provided tax free.   As such, they can be efficient for both the employer and employee.

Examples include; pension contributions, provision of a company mobile telephone for business and personal use, provision of a parking space, certain death in service insurance policies when provided as part of a pension arrangement, tax free loans to employees for travel purposes or one or more annual staff events up to £150 per employee pa.

Therefore when considering how to incentivise and remunerate employees, consideration should be given to how tax efficient benefits can be used as part of an overall strategy.

For more information, contact our payroll team.