Benefits in kind are exempt from taxes (Image: Getty)
A major change to tax relief has given British workers a new perk. HMRC rolled out new rules that allow employers to reimburse their employees for costs, without it being treated as a taxable “benefit-in-kind”.
Brits can be reimbursed for spending on eye tests, home working equipment and flu vaccinations, with these expenses now exempt from income tax and national insurance, a change that took effect on April 6.
Previously, these were exempt from levies only if the employer had arranged and paid for them directly. If an employee had purchased them themselves and were reimbursed, it would have been treated as taxable earnings. But they are now also exempt from income tax and National Insurance.
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HMRC made changes at the start of this tax year (Image: Getty)
The new reimbursement of “accommodation, supplies or services used in performing employment duties”, as well as for both the reimbursement and direct provision of flu vaccinations, extended the existing exemption for eye tests and corrective appliances, the Government confirmed on November 28.
Officials predict that the change will have a “negligible” impact on the Exchequer.
The Government added that it will affect an unknown number of individuals, whose employers offer these exemptions, and may choose to do so through reimbursement.
“Employees need to be aware of the change so they can claim reimbursements for low-value items such as eye tests, flu vaccines and home office equipment,” officials said.
“The number of individuals impacted is expected to be modest and will depend on employer uptake.
“This measure is not expected to impact on family formation, stability or breakdown.
“This measure is expected overall to impact individuals’ experience of dealing with HMRC by making the rules simpler, easier to understand, and more flexible.”
There will be a mandatory requirement for employers to report benefits in kind in real time.
The Treasury says this “aligns with the government’s aim to simplify tax reporting, reduce errors, and close the tax gap”.
Currently, employers are allowed to register to voluntarily report benefits in kind, in real time, to HMRC.
Those who choose to do so are required to register with the department before the start of the tax year.
But, from April 2027, voluntary registration will not be required, ministers say, as employers will be mandated to report and pay both income tax and class 1A national insurance contributions on benefits in kind in real time.