Tax on employees’ perks soar by nearly 20% to £3.3bn

Publications that covered this story include The Times on 30 June 2018.
  • White van man sees 60% increase in tax
  • Rise in the cost of providing health care increases tax bills by £110m

The value of tax that employees have had to pay on their job perks has soared by nearly 20% in the past year, up from £2.8bn in 2015/16 to £3.3bn in 2016/17, our research shows.

The biggest increases in the tax take from work benefits include:

  • Company cars – People driving company cars have seen a 25% increase in their tax bills, which have risen from £1.5bn to £1.85bn in the last 12 months as the Chancellor has pushed cars into higher emission tax bands.
  • Private medical insurance – HMRC’s tax take has increased 17% from £660m in 2015/16 to £770m in 2016/17. This is because the cost of obtaining medical care has increased – the number of employees getting medical insurance has actually fallen.
  • Vans – The tax hit for the “white van man” has increased by 60% to £80m in 12 months. This is a relatively new taxed introduced to make the “white van man” pay for the benefit of using their van for non-work related errands and other journeys.

Although the tax taken has soared, the total number of people receiving taxable benefits has actually fallen in the last 12 months to 3.66m in 2016/17 from 3.76m in 2015/16.

Andrew Snowdon, Head of Tax at UHY Hacker Young, comments: “Whist the popularity of work perks may be falling, HMRC is collecting more tax from this area than ever before.”

“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 are 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.”