Tax Advice

Can’t afford a pay rise? The top tax-free perks you can give your staff

24 Jun 2016

It can be hard to find the extra funds to pay your staff more, especially if you are just starting up, but there are plenty of ways to keep your staff happy and motivated without a pay rise.

There are several benefits you can provide that won’t cost much and in some cases can be claimed on your tax bill.

Look out for some perks that could be seen as a benefit-in-kind, making them subject to income tax.

If this happens an employee would need to complete a p11d form that is submitted to HMRC to pay tax on the extra benefit.

In some cases the tax on a benefit-in-kind could be taken out from an employee’s payslip.

We reveal five low-cost employee perks you could provide to keep your staff fit and happy. 

Clothing allowance

Fashion

Rather than a pay rise, you could incentivise staff with an employee discount

This could be money off meals if you work in a restaurant or discounts on clothes if you run a fashion retailer.

As long as the discount still meets the marginal cost of an item then there is no taxable benefit, meaning there would be no tax to pay by you or your staff.

Health

A healthy workplace is a happy workplace.

If your staff are fit and healthy there will be fewer absences, making a more productive workforce.

You can provide health insurance through the workplace that gives employees access to medical cover.

Employers need to pay national insurance on the taxable value of the benefits and employees have to pay income tax.

Employers can claim for the cost of providing the scheme on the corporation tax bill.

Running Expense

If you want to provide a benefit that isn’t taxable but also good for your employees’ health, then consider eye tests.

Eye tests are not deemed a taxable benefit and are actually a legal obligation for companies whose employees use computers for a significant part of their working day. They are fully deductible against corporation tax for companies and not subject to employer's national insurance.

Cycle to work scheme

Employers can set up a scheme to let staff loan a bike and make repayments through their gross salary.

This is a cheaper way for employers to get a bike that they can use to get to and from work and keep at home.

They pay a deposit to a bike shop that is part of the chosen scheme and the repayments are made through the employee’s gross salary, saving them tax.

This is not a taxable benefit and any set up costs by the business can be claimed on corporation tax.

There are certain tax rules at the end of the loan period if you want to own the bike.

Mobile phones

We live in an increasingly globalised and technology focused world.

You can ensure your employees are on call when needed by buying them a mobile phone.

Phone

There is no tax liability and you can reclaim the costs.

This also means there is no excuse for your employees to try to ignore your calls.

Pension contributions

What could be a better perk than helping employees towards a richer retirement.

Soon all businesses will be required to provide a workplace pension.

Pension contributions to a registered scheme can be a very effective tax free incentive for an employer to provide. Employers’ pension contributions can generally be claimed as an allowable expense against corporation tax.

In addition, neither employers nor employee’s national insurance contributions are payable. 

Having a scheme in place also means that directors can pay a pension contribution to reduce their personal tax liability, which may be particular of benefit if the director is a higher rate tax payer.

Chris Conway

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Managing Director, Accountant & Corporate Finance Specialist

0207 043 4000

About the author

Chris joined Accounts and Legal as Managing Director in November 2015. Chris’s primary role is ensuring the firm runs smoothly on a daily basis, supporting the growth of its entrepreneurial clients and delivering the firm’s own ambitious growth objectives. 

Having qualified as a Chartered Accountant (ICAEW) in general practice with a Top 20 firm in 2010, Chris quickly chose to specialise in corporate finance. During his 5 years Chris worked on over 70 transactions involving SME’s, from company valuations and restructures to substantial equity and debt fundraisings. He also advised on the sale and purchases of businesses, both to trade buyers and financial investors, providing advisory and due diligence services.

  

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