Cheap or interest free loans If loans made by the employer to an employee exceed £10,000 at any point in a tax year, tax is chargeable on the difference between the interest paid and the interest due at an official rate - currently set at 2% per annum. An exception applies for certain qualifying loans - please contact us for information. Tax Tip The £10,000 limit on tax free loans is an attractive perk for many employees. Childcare costs Childcare costs paid for by an employer may be exempt from both income tax and NICs. This applies to a place in an employer operated nursery and to Employer Supported Childcare as long as the claimant entered the Scheme before 4 October 2018. In the latter case, the exemption is limited and excess amounts are subject to tax and NICs. Employer Supported Childcare is now closed to new claimants and has been replaced by Tax-Free Childcare (see the Family Matters section of this guide). Employees who qualify for both schemes are able to choose which scheme they wish to use but families cannot benefit from both schemes at the same time. Pension contributions Contributions by an employer to a registered pension scheme are generally tax and NICs free for most employees. This may be far better than any other perk.
Tax Tip Youmay want to sacrifice some of your ‘normal’ salary to do this. Please talk to us tomake sure your salary sacrifice scheme is effective. Expense payments An employee can claim tax relief for expenses which are incurred wholly, exclusively and necessarily for business purposes. The main types of expense are travelling to places for work (but not the normal place of work) and overnight accommodation. Reimbursed expenses An employer would normally reimburse an employee for business expenses. Employers are no longer required to report reimbursed tax deductible business expenses and therefore employees do not need to claim tax relief on these expenses. Mileage claims Many employers pay a standard rate of mileage to all employees who use their own cars for business journeys. HMRC set statutory rates for business mileage which are 45p for the first 10,000 miles in a tax year and 25p thereafter. If the employee is paid for business miles at less than the statutory rates, tax relief is available on the difference. If, however, the employee is paid at more than these rates then the excess is taxable. If you are paid less than the statutory rates to use your own car for business purposes remember to claim a deduction on your return or write to HMRC to make your claim.
Example In 2021/22 Michael travels 14,100 businessmiles in his own car and is paid 32p per mile by his employer. Michael can claim tax relief on an additional amount of £1,013 ((10,000 x 45p) + (4,100 x 25p)) - (14,100 x 32p). Vans Where employees are provided with a van and the only private use of this is to travel to and from work (including any incidental private use), then no taxable benefit should arise. If there is private use beyond this, there is a benefit of £3,500 for 2021/22 and an additional £669 if fuel is provided for private as well as business journeys. In order to avoid this charge, it is advisable to have a formal written policy, detailed mileage logs and make use of vehicle tracker records. These will support the limited private use of the van and may avoid problems with HMRC in the future.
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