12 Nov

What are the non-taxable benefits for employees?

Business owner with mac and calculatorMaking sure that you’re aware of the non-taxable benefits for your employees really is a win-win situation. Not only will it help your company save money, but it’ll also make your finance systems and processes much more efficient. Not to mention it’ll also save your employees some money too!

You may be familiar with the P11D form, a tax form that is filed by employers to report benefits and expenses that are made to employees. There are certain exemptions that fall outside of the categories in the P11D form, the likes of which are referred to as ‘non-taxable benefits’. Not sure what this means? Don’t panic, we’ve got you covered.

What do my employees need to know?

In essence, employees need to know that they can claim for expenses they’ve paid themselves without receiving reimbursement, or expenses that are reimbursed by their employer but that were taxed. These expenses must relate to items or services that’ve been bought in direct relation to their job, and all receipts and records of purchase must be kept. 

It’s important to note that employees cannot claim for non-taxable benefits on expenses that have already been reimbursed by the employer. For more information about what you can claim as business expenses, head over to our how to reduce your corporation tax legitimately blog. 

Can I claim for non-taxable benefits if I am self-employed?

In a word - yes! HMRC knows that you’ll need to make certain purchases to keep your business running, and so you’re able to deduct these costs from your profit, which will in turn lower your tax bill. You should be able to deduct the costs when working out your taxable profits.

What can I do as an employer?

There are three ways you can claim non-tax deductible expenses or benefits:

  1. Dispensation - this is an arrangement between an employer and HMRC that allows an expense or benefit to be covered by an allowable deduction, meaning that no tax is due and that the expense is not required on the P11D form.
  2. PAYE Settlement Agreement (PSA) - this agreement allows you to make one annual payment which covers all tax and national insurance due on minor, irregular or impracticable expenses or benefits for your employees.
  3. Statutory Exemption or an Extra-Statutory Concession - this means that HMRC is able to grant certain concessions to taxpayers to mitigate their liabilities. These allowances wouldn’t normally be allowed under the current terms of tax legislation.

What are the exemptions?

The full list of exemptions can be found on the HMRC website. We should warn you; it’s pretty long! It’s also worth noting that the exemptions can vary depending on whether you’re self-employed or not, so do bear this in mind.

We’ve collated some of the most common exemptions for you right here:

  • Accommodation, supplies and services
  • Travel (for more information about travel expenses, have a look at our blog post about claiming mileage)
  • Food
  • Pensions
  • Childcare
  • Training
  • Employee awards
  • Team events, entertainment and gifts
  • Sports facilities
  • Counselling

Any questions?

If you have any questions about non-taxable employee benefits, feel free to contact us. We can help with any worries you might have or help to clarify any points that you’re unclear about.


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