Employee Benefits 2016/17
|2016/17||Percentage of chargeable value|
|CO2 emissions (g/km)||Petrol||Diesel|
|Above 94||Add 1% for every 5g/km|
|Above 200 (petrol)/ 185 (diesel)||37% maximum|
- 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.
- 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 employee.
- The employer must also pay Class 1A NIC at 13.8% on the cash equivalent amount of the benefit.
Car fuel benefit
- 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.
- The benefit is charged without reduction for contributions by the employee unless all private fuel is paid for within the tax year for which it is provided.
- 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.
|Zero emissions van||634||630|
If the private use of a van is restricted to home-to-work travel, there is no tax charge, unlike for company cars.
|Official interest rate||3%||3%|
- 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.
- 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 transport||per business mile|
|Cars, first 10,000 miles||45p|
|Cars, over 10,000 miles||25p|
- Passenger must be completing the same business journey.
- 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.
|Weekly exempt amount||2016/17||2015/16|
|Basic rate taxpayer||£55||£55|
|Higher rate taxpayer||28||28|
|Additional rate taxpayer||25||25|
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.
Main exempt benefits
|Benefit item||Limit 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|
- Many employee benefits are not charged to tax; the principal ones are listed above.
- 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 scheme||Tax 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.|
|Employee shareholder status|
|Worker surrenders certain employment rights in exchange for shares in employing company worth £2,000 or more.||First £2,000 worth of shares are free of Income Tax and NIC. Shares worth up to £50,000 on acquisition are free of CGT on disposal, subject to a limit of £100,000 of exempt gains made on the disposal of shares acquired under Employee Shareholder Agreements entered into on/after 16 March 2016.|
- 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.
- The employer must register the share scheme with HMRC, using the online ERS system, by 6 July following the end of the tax year in which the scheme is implemented.
- Employers must file an annual return for each share scheme online through ERS by 6 July each year.
- An automatic penalty of £100 applies for late submission of an annual share scheme return. Additional penalties of £300 applyon 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.
- The above is a very brief summary of the main tax advantaged share schemes; other conditions apply.