Staff Benefits and Taxation

It is great to offer benefits and perks to your staff to demonstrate your appreciation of the effort they put in to make the business a success. 

There are also many factors to consider when deciding what benefits to offer, for example cost and desirability. The way that these benefits interact with tax is also an important factor to be considered when putting together the most appropriate and effective benefits package.

Below is a breakdown of the most frequent benefits our clients offer their employees:

Death in service

Death in service is a group life insurance scheme for some or all the employees of a company. If a member of staff were to die whilst in employment (not meaning whilst at work) the policy will pay a lump to the employee.

The premiums paid by you in respect of employees are treated as a business expense. They are not recorded as a P11D benefit for the employee. The payout from the policy is tax free. (Assuming the policy meets the relevant requirements)

Group Critical Illness

Group critical illness is a policy that covers some or all the employees of a company. If a member of staff were to be diagnosed with a critical illness whilst in employment the policy will pay out a lump sum to the employee.

The premiums paid by you in respect of employees are treated as a business expense. They are treated as a P11D benefit employees. The payout would not be subject to tax. (Assuming the policy meets the relevant requirements)

Group Sick Pay 

Sick pay, or income protection, is a policy that will pay an on-going income to an employee who has been off work for a prolonged period of time. The time at which the benefits start and cease will depend on the specifics or your individual policy.

The premiums paid by you in respect of employees are treated as a business expense. They are not recorded as a P11D benefit for the employee. The payout from the policy is recorded as a business receipt for the company. You then forward the income to your employee as salary through the PAYE system. 

Group Private Medical 

Private medical insurance is a policy that will pay for your employees to receive private medical treatment. There may be an excess for the employee to pay and the level of benefit will depend on how comprehensive a policy you take out. 

The premiums paid by you in respect of employees are treated as a business expense. They are recorded as a P11D benefit for the employee. The payout goes directly to the care provider and does not lead to a tax event. 

If you would like to know more, please get in touch.

Please always seek advice in respect of your individual circumstances.