Glass stairs

Taxation and the Cost of Living Crisis

Jo Scott, Manager, Employment Tax
04/08/2022
Glass stairs
How can employers use taxes to ease the pressure for employees?

The cost of living has been increasing across the UK since early 2021 and has recently reached its highest recorded level (ONS).

Additionally, the health and social care levy introduced in April 2022, has seen a 1.25% increase in national insurance rates, bringing additional costs to both employee and employer.

As employees are feeling the squeeze on their finances, employers are looking for tax-efficient ways of supporting them.

Some employers are now looking into some commonly overlooked tax-free benefits that can be provided to employees.

  1. Free or subsidised ‘workplace meals’ can be provided tax-free as long as they are available to all employees at the same location. This does not require the employer to have a canteen, and not all members of staff need to take up the offer, but this may be an effective way for employers to provide some direct support to their employees.
  2. Although not a realistic option for all employers, it is still possible to provide tax-free car parking at or near the office. The cost can be met directly or reimbursed to employees via a voucher / token etc.
  3. If employees have to work later than usual and this is not a regular occurrence, employers can provide tax-free transport home if certain conditions are met.
  4. There are also tax breaks when employers provide welfare counselling, pension advice, small loans, training courses and trivial benefits (<£50) without triggering any tax or NIC liabilities.
  5. Many employers are also taking advantage of the reduction in national insurance when a salary sacrifice arrangement is put in place (often for electric vehicles). The NI savings can be shared with the employee to provide an effective increase in take-home pay.

If you would like to know more, please get in touch with your usual Crowe contact.

Insights

Salary sacrifice arrangements have historically been beneficial in saving tax, NICs or both.
Employers need to be confident in their furlough claims and that no errors have been made or identify any errors that were made.
Stay compliant with employment taxes in 2023.

HMRC’s CIS guidance due to be updated on expenditure confusion.
Salary sacrifice arrangements have historically been beneficial in saving tax, NICs or both.
Employers need to be confident in their furlough claims and that no errors have been made or identify any errors that were made.
Stay compliant with employment taxes in 2023.

HMRC’s CIS guidance due to be updated on expenditure confusion.

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Dinesh Jangra
Dinesh Jangra
Partner, Global PracticeLeader for Global Mobility
London