In many employments employers provide their employees with benefits some of these are taxable and there are special methods for working out what the taxable benefit may be.
How you are taxed on a benefit provided by your employer depends on whether you earn at a rate of £8,500 or more per year, or less than this amount. The rules are more generous to the very lower paid, who will be part-time workers.
In working out if you exceed the £8,500 limit, the value of any of benefits received must be included, so your actual salary may be beneath the threshold, but the value of benefits in kind could mean you still fail the lower-paid employee test. Generally, in working out the £8,500 threshold, benefits are added in at their actual cost to the employer.
Directors cannot normally count as lower-paid, however much they earn, but there are exceptions for directors of charities and not for profit organisations.
If you are in lower paid employment then generally the taxable benefit is the cash amount you are able to convert the benefit into. For example if you are given a printer which originally cost £350 and you are able to sell it second hand for £50, the taxable benefit is £50.
However some benefits cannot be sold on the open market, for example, the use of a company car or medical insurance and in these cases there is no taxable benefit.
These exceptions are now rare and the vast majority of people are taxed according to the £8,500 and over rules. We cover these rules in our Benefits in kind section
There are certain circumstances where the taxable benefit is the same no matter what your earnings. These are where you receive:
- Vouchers
- Credit tokens
- Living accommodation
Just as important for the employee are the rules surrounding expenses which can be claimed, either when these are reimbursed by the employer or even when they are not. We cover these in two parts, firstly covering the position where you are Using your own car and other business travel and then under Other employment expenses and payroll giving.
