Employee Benefits

Car benefit 2017/18

 Percentage of chargeable value
CO2 emissions (g/km)PetrolDiesel
0-50 9% 12%
51-75 13% 16%
76-94 17% 20%
Above 94 Add 1% for every 5g/km
Above 189 (petrol)/ 174 (diesel) 37% 37%

Notes

  1. Where the car is provided by the employer, the employee is taxed on the ‘cash equivalent’, calculated as a percentage (based on its CO2 emissions) of the vehicle’s chargeable value.
  2. The chargeable value is the vehicle’s list price when new plus the cost of most accessories added, less any capital contribution of up to £5,000 from the employee.
  3. The employer must also pay Class 1A NIC at 13.8% on the cash equivalent amount of the benefit.

Car fuel benefit

 2017/182016/17
Benefit multiplier £22,600 £22,200

Notes

  1. Where fuel is provided by the employer for private use in a company car, the percentage used to calculate the car benefit is applied to the benefit multiplier in order to determine the taxable benefit.
  2. The benefit is charged without reduction for contributions by the employee, unless all private fuel is paid for (in which case there is no benefit). For 2017/18, this must be done by 6 July 2018, but 2016/17 it must be done by 5 April 2017.
  3. Where the employer provides the car and the employee provides the fuel, HMRC’s advisory fuel mileage rates can be used to reimburse the cost of fuel used on business journeys. Those rates are updated each quarter and published at www.gov.uk/government/publications/advisory-fuel-rates.

Van benefits

 2017/182016/17
Ordinary van £3,230 £3,170
Zero emissions van 646 634
Fuel benefit 610 598

Note

If the private use of a van is restricted to home-to-work travel, there is no tax charge, unlike for company cars.

Employment-related loans

 2017/182016/17
Official interest rate 3% 3%

Notes

  1. Where the total amount loaned to the employee exceeds £10,000 at any point in the tax year, the cash equivalent benefit is the excess of the official rate over any interest actually paid by the employee to the employer (provided there is a contractual agreement to pay that interest).
  2. Loans from a close company to directors or shareholders of the company may also generate a tax charge for the company.

Tax-free mileage allowances

Employee's own transportper business mile
Cars, first 10,000 miles 45p
Cars, over 10,000 miles 25p
Business passengers 5p
Motorcycle 24p
Bicycle 20p

Notes

  1. Passenger must be completing the same business journey.
  2. For all except the business passengers allowance, if the employer does not pay the full mileage rate, the employee can claim tax relief on any shortfall from HMRC.

Childcare vouchers

Weekly exempt amount2017/182016/17
Basic rate taxpayer £55 £55
Higher rate taxpayer 28 28
Additional rate taxpayer 25 25

Note

  1. Employees who joined the employer-provided childcare voucher scheme before 6 April 2011, and are still employed by that employer, continue to receive a benefit of £55 per week, whatever their marginal rate of tax.
  2. New Tax-free Childcare (TFC) accounts will be introduced in April 2017 and rolled out to all eligible parents over the coming year. They will eventually replace the childcare voucher scheme
  3. Under TFC, where both parents work and earn at least £115 per week (but neither earns more than £100,000 per year), they will be able to put up to £8,000 a year into an account, which the Government will top up with 25p for every £1 contributed by the parents. This account can only be used to pay for childcare up to the age of 12.
  4. The limits for parents of disabled children are doubled and contributions can continue up to the age of 17.
  5. Unlike the voucher scheme, TFC is available to the self employed.

Main exempt benefits

Benefit itemLimit of exemption
Mobile phone One per employee
Subsidised meals For all employees in a staff canteen
Works buses Must be used only or substantially by employees or their children
Bicycles and safety equipment Loaned to employee
Pension contributions Annual allowance (see Investment Reliefs)
Personal incidental expenses when staying away from home £5 per night, £10 if abroad
Qualifying medical treatment £500 per employee per tax year
Eye test and spectacles or lenses Required solely for VDU use
Health screening or medical check-up One screening per tax year
Overseas medical treatment When working abroad
Relocation expenses £8,000 per employee per move

Notes

  1. Many employee benefits are not charged to tax; the principal ones are listed above.
  2. The medical treatment must be recommended by an occupational health service and must be provided to help the employee return to work.

Employee share schemes

Type of share schemeTax advantages
Share Incentive Plan (SIP)
Free shares worth up to £3,600pa. Employee can buy up to £1,800pa out of pre-tax pay. Employer can match bought shares with up to two more. If shares left in the scheme for at least five years: no Income Tax or CGT on the value when they leave the scheme.
Enterprise Management Incentive (EMI)
Trading companies with fewer than 250 employees can grant options to selected employees to buy up to £250,000 worth of shares. No Income Tax or NIC if option is exercised within ten years of option grant. Shares qualify for 10% rate of CGT on disposal if grant is at least one year before disposal.
Company Share Option Plan (CSOP)
Share options to buy up to £30,000 of shares can be granted to employees. No Income Tax or NIC if option is exercised between three and ten years of grant. Gains on disposal are subject to CGT.
Save As You Earn (SAYE)
Employees contribute up to £500 a month to a savings scheme, and use money to exercise share options. No Income Tax or NIC if option is exercised three years or more after the grant of option. Gains on disposal are subject to CGT.

Notes

  1. Generally, employees are charged to Income Tax on the value of shares that they are given or are issued to them by their employer, less any amount paid for the shares. NIC are also charged if the company is quoted, or the shares can be easily sold. If the employer operates one of the above tax-advantage schemes, the tax charges may be eliminated, reduced or deferred.
  2. The employer must register the share scheme with HMRC, using the online Employment Related Securities (ERS) system, by 6 July following the end of the tax year in which the scheme is implemented.
  3. Employers must file an annual return for each share scheme online through ERS by 6 July each year.
  4. An automatic penalty of £100 applies for late submission of an annual share scheme return. Additional penalties of £300 apply on 7 October and 7 January if the annual return is still not filed by those dates. Further penalties of £10 per day apply from 7 April onwards.
  5. The above is a very brief summary of the main tax advantaged share schemes; other conditions apply.
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