Taxing Stuff

Do you want to give your staff a tax free incentive?25 Jun

If you want to reward your staff for all of their hard work in these difficult times but don’t want to give the taxman any extra, read on!

Childcare vouchers

The first £55 per week of childcare vouchers that you give to an employee is both tax and NI-free. The employee can use the vouchers to pay for approved childcare, e.g. a registered childminder. They give the voucher to the approved child carer who then sends it back to you for the company to settle.
The £55 limit is per parent not per child so if both parents work work for you, they can receive up to £110 a week tax-free (via separate vouchers).

Suggestion Scheme

In certain circumstances employers can reward staff tax-free for ideas. Even if you get snowed under with suggestions, you get to pick the ideas to be used or rewarded, so you can decide who gets the money.
The taxman, however, will want to know all about the tax-free amounts you are giving to your staff, so you will need to have evidence of the benefit the business has derived from the suggestion by way of an estimate of the cost savings, or extra sales revenue etc.

The maximum you can pay for suggestions not implemented is £25. The maximum for a suggestion implemented is the lower of £5000 or 50% of the expected financial benefit in the 1st year ( or 10% of the expected financial benefit over 5 years).

Gift for personal appreciation

A gift made to your employee in recognition of some personal quality but not a reward for performing duties whether past, present of future, can be made tax free. An example might be a wedding gift.

Personal Incidental Expenses

If an employee has to stay away overnight on business, then you can pay them up to £5 per night in the UK (£10 per night overseas) tax-free, in respect of their miscellaneous personal expenses such as telephone calls home or newspapers. You need make sure you don’t accidentally reimburse the expenses twice – first as part of the hotel bill and second via the employee’s separate expense claim.

Medical Check Up

Periodical check-ups paid for by the company are not a taxable benefit. However, for the exemption to apply, the health screening or medical check-ups have to be available to all employees generally, on similar terms. ( Medical Insurance is a taxable benefit)

Employee working from home.

If your employees work at home regularly, but not full-time, they can claim the increased energy needed to heat and light the property for longer and any extra water used, if it is metered. However, they can’t claim a proportion of their mortgage or Council Tax as these are fixed, whether or not you work from home.
The claim must also be supported by receipts, showing the increased energy, water etc. used due to you working at home. These are tedious for you to collect and expensive for your company to process. Instead why not pay £3 per week to all of your employees who work from home on a regular basis? This may seem trivial, but it’s still £156 a year tax-free.

Could any of these suggestions work for you? Leave your details below, or contact us directly on

4 Responses to “Do you want to give your staff a tax free incentive?”

  1. Simon Morton

    Great article, now all I need to know is how to work this system to my advantage. Suggestion scheme surely has potential for a bit of fiddling.

  2. Aileen Major

    I think we’d prefer it if you used words like “consideration” or “further investigation”, rather than “fiddling”, Simon!!

  3. Julie Collarbone

    That is why it is important to document everything about the scheme so that HMRC cannot accuse you of “fiddling”

  4. modified car club

    The suggestion scgheme is an ideal way to help workers at times like this recession its a great idea

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