Tax on employee perks hits record £3.3bn

The value of tax that employees have had to pay on their job perks is up by 18% in the last year, up from £2.8bn in 2015/16 to £3.3bn in 2016/17, with company car and van drivers hard hit

The biggest increases in the tax take from work benefits have hit company car drivers, employees with private medical insurance and a hike in tax on vans, as HMRC drills down on any potential additional revenue, according to analysis by UHY Hacker Young.

People driving company cars have seen 25% increase in their tax bills, which have risen from £1.5bn to 1.85bn in the last 12 months as the Chancellor Philip Hammond has pushed cars into higher emission tax bands.

The tax take from private medical insurance has increased 17% from £660m in 2015/16 to £770m in 2016/17. This is because the cost of obtaining medical care has increased although the number of employees getting medical insurance has actually fallen.

The tax hit for ‘white van man’ have increased by 60% to £80m in 12 months, with a clampdown on the use of vans for non-work related errands and other journeys.

 Although the tax taken has increased by 20%, the total number of people receiving taxable benefits fell in the last tax year to 3.66m in 2016/17 from 3.76m in 2015/16.

Andrew Snowdon, head of tax at accountancy firm UHY Hacker Young, said: ‘While the popularity of work perks may be falling, HMRC is collecting more tax from this area than ever.

‘Despite many employees not seeing a rise in the headline rate of tax in the last few years they are seeing an increase in these stealth taxes.

‘It seems that HMRC has an irresistible desire to tax job perks – everything from late night taxis home from the office through to gym membership or health checks are now taxed.

‘Work perks as a good way for businesses to recruit and retain the best talent. But as HMRC ratchets up tax rates on some perks, there will soon come a time where the size of the tax bill outweighs the benefits.’

Report by Sara White

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