If you are an employee and use your own money to buy things you need for your job, you can sometimes claim tax relief for the associated costs. It is usually only possible to claim tax relief for the cost of items used solely for your work.
You may also be able to claim tax relief for using you own vehicle, be it a car, van, motorcycle or bike. As a general rule, there is no tax relief for ordinary commuting to and from your work. The rules are different for temporary workplaces where the expense is usually allowable and if you use your own vehicle to do other business related mileage.
Employers usually make payments based on a set rate per mile depending on the mode of transport used. There are approved mileage rates published by HMRC. The approved mileage allowance payment rates are available where you use your own car on a business trip. Where the approved mileage rates are used, the payments to you are not regarded as a taxable benefit.
Where an employer pays less than the published rates, you could claim tax relief for the shortfall using mileage allowance relief. For all cars the approved mileage allowance payment for the first 10,000 business miles is 45p per mile and 25p per mile for every additional business mile. The approved mileage rates are 20p per mile for bicycle travel and 24p per mile for motorcycle travel.
There is an additional passenger payment you can receive of 5p per passenger per business mile from your employer. This is available if you carry fellow employees in your car or van on journeys which are also work journeys for your colleagues.
We would be happy to help you review any vehicle related expenses to understand any tax relief that may be available.
Any Christmas bonuses / gifts paid in cash to employees, by employers, are almost invariably taxable as earnings. This view has been upheld by the courts on many occasions and can mean that a gift from a well-intentioned employer is worth less than the giver or the recipient initially expected.
If you are an employer and looking to give a Christmas bonus to your employees, then your best option is probably to give them a gift. To ensure that this is not a taxable gift, it is important to confirm that the trivial benefits in kind (BiK) rules apply.
The tax exemption applies to trivial BiKs where the BiK:
- is not cash or a cash-voucher; and
- costs £50 or less; and
- is not provided as part of a salary sacrifice or other contractual arrangement; and
- is not provided in recognition of services performed by the employee as part of their employment, or in anticipation of such services.
For example, a turkey that cost £45 would qualify as would a £15 bottle of wine. It is also possible to provide employees with a gift voucher (not a cash-voucher) if the value is £50 or less. It is important to remember that the gifts must not be provided in recognition of the employees’ services but merely as a gesture of goodwill at Christmas.
There is an annual cap of £300 for directors or other office-holders of close companies and to members of their families or households. The £300 cap does not apply to normal employees.
There is no longer a requirement for employers to report these benefits on P11Ds or PAYE Settlement Agreements. However, if the Christmas gifts have a value of over £50 or cannot be counted as a trivial benefit, then the gift must be reported on form P11D and employer Class 1A NICs will be payable.
There are some important rules to be aware of if you provide parking spaces to your employees. If the parking places you provide are at, or near your employee’s workplace, then you are entitled to an exemption. This means there is no requirement to report anything to HMRC and you would not be required to pay any additional tax or National Insurance for these parking spaces. These rules include the provision of parking spaces for cars or motorbikes at, or near, the employee’s place of work. The provision of facilities for parking bicycles is also exempt.
There is no legal definition of the words 'at or near' in the relevant act and HMRC say the exemption is available in any case where parking facilities can be said to be within a reasonable distance from the place of work, having regard to the nature of the locality. It does not matter if the car park is not the one closest to the place of work.
However, if you provide parking places which aren’t covered by an exemption, you will need to report them on form P11D and pay Class 1A National Insurance on the cost of providing the parking places.
The exemption does not apply to parking spaces you provide that are not either:
- at or near the employee’s workplace
- for use on a business journey.
There are many taxpayers that have reached the State Pension age and continue to work. It should be noted that the requirement to pay any employee or self-employed National Insurance Contributions (NICs) ceases once a taxpayer reaches the State Pension age, subject to the following clarification. Taxpayers remain liable to pay any NICs that were due to be paid on earnings before they reached the State Pension age. The self-employed will need to pay Class 4 NICs for the remainder of the tax year in which they reach State Pension age but will be exempt from the following year.
Certain occupations have a compulsory retirement age after which you are no longer allowed to work. An employer must have a good reason for setting a compulsory retirement age if there is an age limit set by law, or the job requires certain physical abilities. Apart from these special circumstances there is no official retirement age and taxpayers usually have the right to work beyond the State Retirement age. There is also no requirement to provide a date of birth when applying for a new job.
Taxpayers can usually claim their pension whilst they continue to work, as long as they have reached the State Pension age, or the age agreed with their pension provider (if drawing from a personal pension or workplace pension arrangement).
When a new employee is added to the payroll it is the employers' responsibility to ensure they meet the employees’ rights and deduct the correct amount of tax from their salary. This includes any employees who are family members.
HMRC’s guidance is clear that if you hire family members you must:
- avoid special treatment in terms of pay, promotion and working conditions
- make sure tax and National Insurance contributions are still paid
- follow working time regulations for younger family members
- have employer’s liability insurance that covers any young family members
- check if you need to provide them with a workplace pension scheme
It is possible to employ young people if they are 13 or over but there are special rules that govern how long they can work and what jobs they can undertake. Young workers and apprentices have different minimum wage rates from adult workers for the National Minimum Wage.
There are different rules if you take on volunteers or voluntary staff, but you as the employer are responsible for health and safety and must give inductions and proper training for the 'job' at hand.
The Cycling Minister, Michael Ellis, has announced a number of changes to the Cycle to Work scheme in an announcement that was timed to coincide with Bike week. Bike week is an annual celebration to showcase cycling across the UK and runs from 8 – 16 June.
The Cycle to Work scheme was introduced almost 20 years ago to help promote the use of healthy ways to commute to work using an environmentally friendly and more active mode of transport. This can also speed up commuting time and cut travel costs for many employees.
The changes to the scheme will encourage the use of electronic bikes known as e-bikes. E-bikes have an integrated motor that helps a cyclist pedal, allowing them to reach speeds of up to 15.5 mph in the UK. The use of these bikes widens the appeal of biking to a wider demographic including those that are older or less fit and encourages a new way to commute to work. The use of e-bikes is increasingly popular and 70,000 were sold in the UK last year.
New government guidance will also make it easier for employers to provide cycles and equipment including e-bikes worth over £1,000 by making it clear that FCA authorised third party providers are able to run the scheme.
Employers of all sizes across the public, private and voluntary sectors are eligible to take part in the scheme to provide (technically loan) bicycles and cyclists’ safety equipment to employees as a tax-free benefit. Where the scheme conditions are satisfied, employees can benefit from a tax and National Insurance Contributions (NICs) reduction of between 32% and 42% through a salary sacrifice scheme. In addition, there is no employer liability to NICs.
In some industries, employers provide accommodation to employees because this is required by the nature of the job. There are no tax charges in respect of the provision of living accommodation where
- it is necessary for the proper performance of the employee’s duties that he or she should reside in the accommodation, or
- the accommodation is provided for the better performance of the employee’s duties, and the employment is one of the kinds for which it is customary for employers to provide accommodation for the employee, or
- there is a special threat to the employee’s security, special security arrangements are in force and the employee resides in the accommodation as part of those arrangements.
However, there can be other scenarios whereby an employee is provided with living accommodation and is allowed to sub-let the property. If this is the case, and even if the employee does not sub-let, the ability to sub-let is regarded as money's worth to the employee and will give rise to an earnings charge.
This issue is covered in HMRC’s manuals. HMRC makes the point that the ability to sub-let is unlikely to be encountered that often in practice.
Employees can often reimburse their employers for benefits provided in order to lessen their taxable benefits and thereby reduce or avoid a tax charge. This is referred to in the legislation as ‘making good’ and most often involves the employee making a cash payment to their employer. The payment has the effect of reducing the taxable value of the benefit in kind, often to zero. This reimbursement process reduces the amount of the employee’s taxable earnings, and indirectly, the amount of your employer's National Insurance payments.
Any employees using this option, need to be aware of the 6 July deadline for making the reimbursement. For example, if the benefit in kind was received during the 2018-19 tax year, the deadline for making a reimbursement is normally the 6 July 2019. There are exceptions to this such as paying back private costs made on a company credit card. In these cases, the employee has to 'make good' the benefit before 1 June following the end of the tax year in which the benefit was provided.
Why keeping to these deadlines is important?
Employees can still make payments after 6 July 2019, but by doing so will not reduce the taxable value of the benefit in kind. This means the benefit will still be taxable and liable for National Insurance contributions and cannot be adjusted by the employer.
How much maternity leave can you take?
If you work as an employee and become pregnant you are eligible to take up to 52 weeks of statutory maternity leave. This is made up of 26 weeks of ordinary maternity leave plus an extra 26 weeks of additional maternity leave. If you give the correct notice period to your employer this means you are entitled to take a full year's leave.
Statutory maternity leave is available to all employees and it doesn’t matter how many hours you work or how long you have worked for your employer.
When are you entitled to Statutory Maternity Pay?
There are additional criteria that must be fulfilled if you want to claim statutory maternity pay (SMP). SMP is a weekly payment from your employer made over a 39-week period.
SMP is payable at
- 90% of the employee’s average weekly earnings (AWE) for the first 6 weeks with no upper limit;
- £148.68 (for 2019-20) or 90% of their AWE (whichever is lower) for the remaining 33 weeks.
The SMP is available to employees if:
- They are on the payroll in the 'qualifying week' – the 15th week before the expected week of childbirth.
- Provide the correct notice period to their employer.
- Provide proof they are pregnant.
- They have been working continuously for the same employer for at least 26 weeks up to any day in the qualifying week.
- They earned at least £118 a week (gross) in the 'relevant period'. The relevant period is usually the 8-week period preceding the 15th week before the baby is due, known as the qualifying week.
The maternity allowance is a financial benefit for pregnant women who are self-employed, who are working but do not qualify for the SMP or who have recently stopped working. Your employer is free to offer you additional benefits which includes higher maternity payments, however this is at their discretion and not legally required.
HMRC’s Employment Income Manual is clear that there are special rules when an employee receives goods or services by reason of their employment, that the employee does not pay for in full. The first step should always be to consider whether a voucher or credit-token was used to obtain them.
Any non-cash vouchers, for example gift vouchers or credit tokens from shops, or electronic cards (equivalent to vouchers) given to a director or employee that can only be exchanged for goods or services may be chargeable as benefits.
The chargeable amount is generally the cost to the employer of providing the voucher or card less any amount made good by the director or employee. Non-cash vouchers also include items such as book tokens or tickets, that cannot be exchanged for cash.
The value of the vouchers and credit tokens should be added to the director’s or employee’s gross pay and Class 1 NICs operated unless a specific exemption applies.
The underlying legislation in Part 3 Chapter 4 ITEPA 2003:
- covers all employees (including for 2015/16 and earlier, those in lower paid employment)
- applies to vouchers and credit-tokens provided by third parties as well as those provided by employers
- charges a benefit in respect of vouchers or credit-tokens provided for, or received by, a relation of the employee.