Use of a company car
Private fuel
Using a company van - the current rules
Living accommodation
Vouchers
Employers' credit cards
Private medical insurance
Cheap loans
Home and mobile phones and internet access
Other assets
Goods or services which are part of your employers normal business
Childcare
Use of company car
If you have the use of a company car the benefit to you will be based on a percentage of the list price of the car and any accessories and will be dependent on the type of vehicle. This figure is then multiplied by a percentage based on the vehicle's carbon dioxide emissions.
From 2011/12 (for 4 years) there is a nil benefit charge for cars or vans propelled solely by electricity.
HMRC have a calculator for working out car and fuel benefit.
If you are provided with free fuel for a car with private use then use the calculator to work out your fuel benefit.
You will only pay tax if you use the van for private journeys other than journeys between home and work.
If this applies to you - contact your tax office to make sure you have the correct benefit in your coding notice.
From 2011/12 (for 4 years) there will is a nil benefit charge for cars or vans propelled solely by electricity.
When is there no tax to pay?
There is no tax to pay if you only make business journeys in connection with your job.
There is also no tax charge when you use the van mainly for work and the only journeys you make in it are work journeys and travelling between home and work.
The onus is on your employer to demonstrate to HMRC that you have no tax to pay and to do this you may need to keep your own records of mileage, date and purpose of journey etc. This may be included in your employment contract or you may have to sign a separate agreement about van use.
When might there be tax to pay?
You will have to pay tax on any private journeys you make in the van. Any minor use - that is using the van for a private purpose maybe only once or twice a year is usually considered insignificant and you should not have to pay any tax.
Where you do have to pay tax on private use of the van the amounts of benefit that will be included in your PAYE coding notice are as follows:
2012/13
All vans
Amount included in your tax code - £3,000
Tax at basic rate - £600
The above figures are reduced in some situations - for example:
- If you do not have use of the van for the whole tax year;
- Where someone else also uses it for private travel;
- Where you pay towards any private use.
Where fuel is provided by your employer
If you get free or subsidised fuel for private use from your employer, you will have to pay extra tax.
2012/13
Amount included in your tax code - £550
Tax at 20% basic rate - £110
You can get more detailed information on this here.
The following rules apply to all employees no matter what the level of your earnings but if you are a lower paid employee (i.e. earnings less than £8,500) - the provision of heat and light (where the account is in the employer's name) or use of furniture will be tax free as the benefit cannot be converted into cash.
There will be no taxable benefit in the following cases:
- In order to carry out your job properly you will need to be provided with accommodation e.g. nurses
- Where accommodation is normally provided in cases where it helps you to do your job e.g. caretakers
- Where the accommodation is provided for security reasons because of a threat to your personal safety.
In all other cases the benefit will be the higher of:
- the annual value of the property (this is the letting value of the property on the basis you pay the council tax and the any other charges paid by the tenant and your landlord pays for any repairs or maintenance) or;
- the rent paid by your employer if the property is rented.
Where there is no taxable benefit but the employer pays the council tax or water rates - there is no charge on the employee. In all other cases such payments will count as pay for both tax and National Insurance.
You can still be chargeable on any other benefits relating to the accommodation even if you are exempt but if you are exempt then these benefits cannot be more than 10% of your taxable earnings excluding those benefits.
If the living accommodation cost more than £75,000 there is an increased charge in addition to the letting value. This is worked out as:
(Cost less £75,000 x appropriate %) less the excess of rent paid over the letting value
The appropriate % is the official rate of interest charged on beneficial loans - this information is available here.
The living accommodation benefit is reduced where:
- the property is used for only part of the year or;
- to the extent that any part of the property is used only for business
- if the accommodation is used by more than one employee the total benefit is the amount that would be charged to a single employee so that the benefit is shared equally.
A voucher is any document such as a ticket that you can exchange for goods or services.
If the voucher is for cash or can easily be converted into cash such as stocks and shares - it will be treated as pay and taxed under PAYE.
For any other non-cash vouchers - the benefit is the amount your employer paid for it.
There is a nominal exemption of 15p per day on luncheon vouchers.
There are a number of exempt non-cash vouchers and these include childcare vouchers or transport vouchers such as those to obtain a car parking space at or near the workplace.
Your benefit will be the amount paid by your employer for any goods or services you buy on an employer’s credit card unless these are purely for business purposes (or unless your income is at a rate of less than £8,500).
The benefit will be the cost to the employer for the cover you receive. But health-screening provided for all employees will not attract a benefit.
Interest at the official rate less any interest you have paid. The rate is generally fairly close to that charged by banks and building societies.
There is no charge if the interest is a qualifying loan - this is where the interest would qualify in full for tax relief such as where the interest is a business expense or a deduction from rental income.
For non-qualifying loans there is no charge if the loan is for £5,000 or less.
If the loan is subsequently written off - the benefit will be the amount written off.
An interest free loan to buy a season ticket for travel to work is tax free.
If an employer provides you with one mobile phone and pays all the bills including line rental and for private calls - this is exempt from both tax and NIC.
If the contract is with the employee but the employer agrees to pay or the costs are reimbursed by the employer - the employee is then liable to both tax and NIC less an amount for any business use.
Where the employer pays your home telephone bills - you will be taxed on the payment unless the private use of the phone is insignificant. The amount of the benefit will be the total payment less any business calls but not any part of the line rental. You will be liable to NIC on the amount paid by the employer for both line rental and private calls.
If the contract for your home phone is with your employer then the benefit to you is the line rental and calls less any business calls and any amount made good by you to your employer.
If however there is a definite need for a telephone to be provided and the employer ensures that private calls are minimal - it is possible you will not be charged for either the line rental or calls where the private use is minimal compared with the overall cost.
If your employer provides you with internet access (broadband) in your home purely for business or where private use is at a minimum then provided the package cost is not affected by private use - there will be no benefit to you.
There is generally no benefit on the use of cycles and cycle safety equipment nor on the use of a commercial vehicle (more than 3.5 tonnes weight) including any fuel unless the main use of the vehicle is for private purposes.
Otherwise the charge is 20% of the value of the asset at the time it was first given to you to use.
For other second hand assets the benefit is the higher of the market value at the date you were given the asset and the original market value less any amounts that have already been taxed on the previous user or users.
The benefit in these cases is just the extra cost to the employer of providing you with the benefit. So if you work for a footwear manufacturer and you get free shoes - the benefit is the cost of the materials and manufacturing costs of the shoes.
If however you worked for a train company and you got free travel of their trains - there is no additional cost to the employer in providing the benefit so it is tax free.
Where an employer either alone or with other employers/local authorities provides a workplace nursery then there is no benefit. Where the provision is joint each employer needs to be responsible for a part of the management of the scheme.
The exemption also applies where another employer's staff are allowed to use the workplace nursery when they are working at the premises of the nursery provider.
The provision by employers of qualifying childcare of up to £55 per week is also exempt from tax and NIC. Over this amount tax and NIC are charged on the excess.
You can contract for qualifying childcare with a local nursery or childminder or can be provided by childcare vouchers.
However remember that if your employer provides you with cash to cover your childcare expenses - this is not exempt.
The rules as to how the scheme operates are quite complex. To qualify the scheme must be registered or approved childcare and it must be made available to all employees. The child must be the employee's own child or a child for whom the employee has responsibility.
Generally, for years up to 2012/13 childcare vouchers given to employees who are receiving tax credits childcare help will make them worse off. We explain this strange situation in a number of our news articles.
