Non-taxable payments and benefits (480: Chapter 5)

Find out more information on expenses, payments and benefits that are non-taxable.

The following expenses payments and benefits are not normally taxable under the provisions described in this tax guide.

Annual parties or similar functions


Sections 264 and 266(3)

Annual parties at Christmas or alternative functions of a similar nature, such as an annual dinner dance, which are open to staff generally and which cost no more than £150 per head to provide. Where there’s more than one annual function and their total cost per head exceeds £150, only the functions that total £150 or less will not be taxed.

The figure of £150 quoted is not an annual allowance and the criteria set out at Section 264 ITEPA 2003 must be satisfied to meet the exemption.

Carers board and lodging


Board and lodging provided to carers in the home of the person they’re employed to care for is exempt from tax.

Cost of purchasing assets from employees


Section 326

Costs which an employer incurs like any other buyer, in connection with the purchase of an asset from an employee.

Employee shareholders


Sections 226A to 226D Part 7

The value of employee shareholder shares awarded, less the amount that the employee shareholder is treated as having paid for them, is treated as earnings of the employment. The employee shareholder is usually treated as having paid £2,000 for the shares and this deemed payment is usually only available once to an employee shareholder from the same employer or an associated company.

These shares are employment-related securities and, subject to the specific Income Tax treatment described here, the normal rules of Part 7 ITEPA 2003 will apply to them.

The benefit of the employer funding certain kinds of independent advice in relation to the employee shareholder agreements is not taxable in the hands of the employee.

Employee shareholders with a material interest in the employing company are not entitled to be treated as having paid £2,000 for the shares.

Equipment provided for disabled employees


Section 210 SI No 1596 2002

Employees with a disability are not taxable on the benefit of the private use of equipment or services given by their employer to allow them to take up or to continue work (for example, a wheelchair or hearing aid).

Equipment given solely to carry out the duties of employment are exempt but where equipment is also used outside work so that private use is significant, that exemption does not apply. This exemption makes sure that no taxable benefit arises in these circumstances.

Fees relating to monitoring schemes relating to vulnerable person


Section 326A

With effect from 6 April 2010, there’s no liability to Income Tax where an employer pays direct for, or reimburses an employee for, a fee for an application to join the Protection of Vulnerable Groups (Scotland) monitoring scheme.

Goodwill gifts


Sections 265, 266(1) and 267(2)

The provision of goodwill entertainment for an employee, or for a member of the employee’s family or household, given that:

  • the person providing the entertainment is neither the employer, nor a person connected with the employer
  • neither the employer nor a person connected with the employer has directly or indirectly procured the provision of the entertainment
  • the entertainment is not provided either in recognition of particular services which the employee has performed in the course of the employment or in anticipation of particular services which are to be performed by the employee in the course of the employment

This exemption applies only when the cost of the entertainment is assessable under Section 73 (vouchers), Section 90 (credit tokens) or Section 201 (benefits in kind). It does not extend to liability under Section 62 or Section 70.

Sections 270 and 324

Certain gifts received by an employee if all the following conditions are satisfied, the:

  • gift consists of goods or a voucher or token only capable of being used to obtain goods
  • person making the gift is not the employer or a person connected with the employer
  • gift is not made either in recognition of the performance of particular services in the course of the employment or in anticipation of particular services which are to be performed
  • gift has not been directly or indirectly bought by the employer or by a person connected with the employer
  • gift cost the donor £250 or less
  • total cost of all gifts made by the same donor to the employee, or to members of the employee’s family or household, during the Income Tax year is £250 or less

Health-screening and medical check-ups


Section 320B

A maximum of one health-screening assessment and one medical check-up in any year.

‘Health-screening assessment’ means an assessment to identify employees who might be at particular risk of ill-health.

‘Medical check-up’ means a physical examination of the employee by a health professional for (and only for) determining the employee’s state of health.


Sections 99(1), (2) and 100

The provision of living accommodation in certain circumstances, see chapter 21 paragraphs 21.2 and 21.4.

Late-night taxis

Section 248


Where an employer pays for an employees taxi for a journey from work to home, this represents a benefit unless the:

  • 4 late-night working conditions are satisfied
  • number of journeys is no more than 60 a year

An employee who gets a taxi from work to home once a week (52 times in a year) does not qualify for this exemption unless all the late-night working conditions are satisfied, even though they’ve been provided with a taxi on fewer than 60 occasions in the year.

The late-night conditions that must be satisfied:

  1. The employee is needed to work later than usual and until at least 9pm.
  2. Such late-night working occurs irregularly.
  3. By the time the employee stops work, either public transport has stopped or it would not be reasonable to expect the employee to use it.
  4. The transport provided is by taxi or equivalent road transport.

In most cases it’s clear whether an employee who works until at least 9pm also works later than usual. For example, most restaurant or public house employees usually work later than 9pm and consequently when doing so they do not work later than usual. They cannot therefore satisfy the first condition. Something is ‘usual’ if it conforms to a common or ordinary pattern.

The first condition is intended to apply when someone is needed, on occasion, to work later than usual and until at least 9pm. If someone works later than usual and until later than 9pm this must be irregular. Irregular means not following a regular or established pattern. An employee who works later than usual and until at least 9pm every Friday, or on the last Friday of each month, is not working later than usual irregularly.

Even if an employee works later than usual and until 9pm on one day each week, but on no particular day, this is not irregular. It’s a matter of fact whether public transport is still available. If an employee’s journey home requires taking 2 or more forms of public transport and one of those has stopped by the time of the journey home, the third condition is satisfied for the whole journey.

An employer may consider various factors when deciding whether it’s reasonable to expect an employee to use public transport but because the journey frequency is either reduced or must be completed in the dark, or the employee has had a long day and is tired, or has a heavy case to carry, or is travelling to an unmanned station, are not in isolation sufficient reasons to satisfy the second part of the third late-night working condition.

The extent to which a journey from work to home after 9pm on public transport is significantly different from a journey earlier in the day, so that it’s reasonable for an employer not to expect an employee to undertake that journey, depends on the facts in each case.

Long service and suggestion scheme awards


Section 323

Long service awards made to directors and employees as testimonials to mark long service, which take the form of tangible articles of reasonable cost, or of shares in an employing company (or another company in the same group) when the relevant period of service is not less than 20 years and no similar award has been made to the recipient within the previous 10 years. An article may be taken to be of reasonable cost where the cost to the employer does not exceed £50 per year of service.

Awards under suggestion schemes made to employees where the following conditions are satisfied.

(a) The employer has established a scheme under which suggestions are made, the scheme is open on the same terms to all the employees, or to a particular class or description of them.

(b) The suggestion for which the award is made relates to the activities carried on by the employer.

(c) The suggestion is outside the scope of the employee’s normal duties. The test is whether, taking account of their experience, the employee could not reasonably have been expected to put forward such a suggestion as part of the duties of the post.

(d) The suggestion is not made at a meeting held for the purpose of proposing suggestions.

(e) Awards other than encouragement awards (see (i) below) are only made following a decision to implement the suggestion, and are made directly to the employee or employees concerned.

(f) The decision to make an award other than an encouragement award is based on the degree of improvement in either efficiency or effectiveness, or both, likely to be achieved, measured by reference to the prospective financial benefits and the period over which they would accrue, and the importance of the subject matter having regard to the nature of the employer’s business.

(g) The amount of an award does not exceed:

  • 50% of the expected net financial benefit during the first year of implementation, or
  • 10% of the expected net financial benefit over a period of up to 5 years subject to an overriding maximum of £5,000. Where an award exceeds £5,000, the excess is not covered by this exemption

(h) Where an award is made jointly to 2 or more employees, the amount exempted at (g) above is divided between them in proportion to the amount paid to each.

(i) Any encouragement award is of £25 or less. An encouragement award is one which is made for a suggestion which has some intrinsic merit or reflects meritorious effort on the part of the employee in making the suggestion.

Section 317 as amended by Section 60 FA 2010



Free or subsidised meals provided on the employer’s business premises, or in any canteen where:

  • meals are provided for the staff generally, or a ticket or token is used to obtain such meals
  • the meals are provided on a reasonable scale
  • either all employees may get free or subsidised meals on a reasonable scale, whether on the employer’s premises or elsewhere, or the employer provides free or subsidised meal vouchers for staff for whom meals are not provided

This exemption does not apply in the case of a hotel, catering or similar business, to free or subsidised meals given for its employees in a restaurant or dining room at a time when meals are being served to the public, unless part of it’s designated as being for the use of staff only. Nor does the exemption apply where free or subsidised meals are given as part of salary sacrifice or flexible remuneration arrangements.

Medical treatment abroad


Section 325

The cost of necessary medical treatment abroad borne by the employer, or borne by the employee and reimbursed by the employer, where an employee becomes ill or suffers injury while away from the UK in the performance of their duties, and of providing insurance for the employee against the cost of such treatment.

Mobile phones


Section 319

The provision of one mobile phone provided by an employer to an employee (but not if provided to a family or household member) including any line rental and calls for that phone paid directly by an employer, unless any of these can be converted into money by the employee. Money an employer pays to an employee to use their own mobile phone is taxable. See chapter 22 for details.

Office accommodation, supplies or services


Section 316

Accommodation, supplies or services (for example, office services and equipment, and consumables) used by the employee in performing their duties, where the following conditions are satisfied if the benefit is provided:

  • on or in the employer’s premises the only condition is that any use of the benefit for private purposes by the employee is not significant
  • elsewhere:
    • the employer’s sole purpose in providing it must be to allow the employee to perform the duties of their employment
    • any use of the benefit for private purposes by the employee is not significant
    • that the benefit is neither the provision of a motor vehicle, boat or aircraft, nor involves the extension, conversion or alteration of living accommodation or a building on land adjacent to it, or the construction of a building on such land

Parking spaces


Sections 237, 261(1) and 267(2)

The provision of a car or motorcycle parking space, or facilities for parking bicycles at or near the employee’s place of work.

Payments towards additional household costs incurred by employees who work at home


Section 316A

From 6 April 2003, the Income Tax charge that would previously have arisen when an employer contributes to the additional household costs incurred by employees who work from home, has been abolished.

Where an employee works regularly at home, under agreed flexible working arrangements, an employer may now pay up to £6 per week, £26 per month (£312 per year) with effect from 6 April 2020 without supporting evidence of the cost.

If the employer pays more, then they must either:

  • keep supporting evidence to show that the payment is wholly for additional household expenses incurred by the employee in carrying out the duties at home
  • seek an arrangement with HMRC whereby they can pay a higher amount without a need to keep supporting evidence

Pensions (and others) on retirement or death


Section 307

From 6 April 2019 expenses incurred in the provision of any pension, annuity, lump sum, gratuity or similar benefit to be given to the employee or to be given in respect of the employee to any other individual or charity on the employee’s retirement or death. The cost of providing such benefits may in some circumstances be taxable under other provisions of ITEPA 2003.

Pensions advice


From 6 April 2017 the provision of pensions advice to the employee up to £500. This can include information or advice on general financial and tax issues relating to the employee’s pension arrangements or pension funds. The exception applies where the employer arranges for the advice, or pays or reimburses the employee’s costs.

The advice, payment or reimbursement must be available to all of the employer’s employees generally or generally to its employees at a particular location. Employers can limit provision of the advice, to employees who are nearing retirement or who are about to retire on ill-heath grounds as long as the advice is available to all employees in the same situation.

Purchases on employer’s behalf


Businesses are often run in such a way that employees make payments on their employer’s behalf. For example, an employee may buy stamps, stationery and items of equipment for the employer and be reimbursed the costs incurred from petty cash or by cheque. Such transactions are not providing the employee with either earnings or expenses because the employee has received no money of their own. Accordingly such reimbursements do not feature on form P11D.

Removal expenses and benefits


Part 4 Chapter 7

Removal expenses borne or removal benefits provided by the employer may be exempt from tax and National Insurance Contributions. The exemption is due to employees who change residence as a result of starting a new job or as a result of a transfer within an employer’s organisation.

Under the rules there’s relief which exempts from tax the first £8,000 of removal expenses and benefits which qualify for the exemption. To qualify, removal expenses and benefits must fall within specific categories of expenses and benefits (see below), and the change of residence must satisfy a number of conditions.

The most important condition is that the employee must change their only or main residence as a result of:

  • starting a new employment
  • a change of the duties of the employment
  • changing the place where the duties are usually performed

It is not necessary for the employee to dispose of the old residence in order to qualify for relief. But there must be a change of their main residence. If a relocation is cancelled so that the employee does not in fact change the main residence, any expenses reimbursed or benefits given in connection with the cancelled relocation will be taxable.

The new residence must be within reasonable daily travelling distance of the new normal place of work.

The old residence must not be within reasonable daily travelling distance of the new normal place of work.

To qualify for relief the removal expenses must normally be incurred or the benefits provided before the end of the year of assessment following the one in which the employee starts the new job. It does not matter when the employee moved to the new home.

Expenses and benefits which qualify for exemption can be grouped into 6 categories:

  • disposal or intended disposal of old residence
  • acquisition or intended acquisition of new residence
  • transporting belongings
  • travelling and subsistence
  • domestic goods for the new residence
  • bridging loans

More details of these categories of exempt expenses and benefits can be found at Appendix 7.

Where the employee uses the services of a relocation management company the administration fees charged by the company are part of the costs to the employer of providing benefits for the employee.

To the extent that the benefits provided are qualifying removal benefits, the administration fee also qualifies for relief.

Retraining expenses and courses


Section 311

Costs met by an employer for an employee who’s about to leave or has left within the previous year, to allow the employee to attend certain courses of retraining intended to help the employee get another job. If the employee has not left by the time the course starts, they must leave within 2 years after finishing it.

The exemption is withdrawn if the employee is re-employed by the same employer in the 2 years following the end of the course and the employer is then required to advise HMRC within 60 days of this happening.

Exemption is only available if the employee has been in the employment of the employer for at least 2 years up to the time the course begins (or at the time the employment ceased) for courses which:

  • are designed to teach or improve skills which will help the employee to find new work and are entirely devoted to those objectives
  • last no more than 2 years

The opportunity to attend the course must have been given to all employees in a similar position. The expenses which are exempt are:

  • fees for the course
  • fees for examinations taken during or at the end of the course
  • the cost of essential books
  • the costs of travelling and subsistence to the extent that they exceed the costs normally incurred by the employee in travelling between home and normal place of work (or former place of work if the employee has left)

If, at the time the employee started the course, all the conditions were satisfied but the employee does not then leave the employment within 2 years after the end of the course or is re-engaged within that time, the employer must advise HMRC within 60 days and give full details of the expenses not previously returned.

If, when the course started, it was clear or could have been established that all the conditions about the course and attendance would not be satisfied but the employer nevertheless did not make a return of the appropriate amounts to HMRC, they may be responsible for any tax due.

Some travel between home and work


Sections 248, 266(1) and 267(2)

The cost of transport (for up to 60 journeys in the year) which an employer provides to take an employee home if either:

  • the employee is occasionally needed to work late (9pm or later) but those occasions are not regular
  • by the time the employee can go home, either public transport between the employee’s place of work and home has stopped, or it would not be reasonable in the circumstances for the employer to expect the employee to use it
  • the employee normally travels to and from work in a car shared with other employees
  • the employee cannot get home in the shared car because of unforeseen circumstances which could not reasonably have been anticipated

See the section on late-night taxis for more detail about the late-working conditions.

Section 242

The benefit to employees of travel between home and work in a works bus provided that:

  • the bus or minibus has a seating capacity of 9 or more
  • the service is available to all employees
  • the main qualifying use of the service is travel by employees between home and their workplace or between workplaces
  • substantially, the whole use of the service is by employees (and their children)

The benefit to employees of an employer subsidising a public transport bus service (or other public transport road service) used by employees for travelling wholly or partly between home and work or between workplaces provided that:

  • the service is available to all employees
  • is used for qualifying journeys (as defined for works buses)

The benefit of bicycles or cyclists’ safety equipment (or vouchers to obtain these) lent to employees provided that:

  • bicycles and equipment are available generally to employees
  • the employees’ main use of the bicycles or equipment is for journeys between home and their workplace, or between workplaces


Certain travelling expenses of unpaid directors of non-profit making companies and of directors holding office as part of a professional practice. See paragraphs 8.11 and 8.14 of tax guide 490.

Section 245

Reasonable travelling and subsistence expenses reimbursed to or borne on behalf of employees where, owing to the dislocation of public transport by strikes or other industrial action, employees occupy hotel or other overnight accommodation at or near their permanent workplace, or incur extra costs in travelling to and from work.

Section 246

Assistance with the cost of travelling between home and work given to disabled persons. This exemption also applies to the car and car fuel scale charges in certain limited circumstances. See chapter 11 paragraph 11.17 and chapter 13 paragraph 13.5.

Section 305

Travelling facilities provided between the mainland and offshore oil or gas rigs or platforms. And, where the timing of transport between the mainland and the rig make it necessary for employees to take overnight accommodation near the mainland departure point, subsistence expenses borne on behalf of, or reimbursed to, employees working on offshore oil or gas rigs or platforms.

Sports facilities


Section 261

Sports facilities generally available to the employer’s employees and members of their families and households. This does not apply to facilities:

  • available to the general public
  • consisting of or provided in association with overnight or holiday accommodation
  • provided on domestic premises
  • consisting of mechanically propelled vehicles or vessels such as cars, motor boats and aeroplanes

Trivial benefits


Benefits are exempt from tax and National Insurance Contributions if all the following conditions are met, the:

  • cost of providing the benefit does not exceed £50 (or the average cost per employee if a benefit is given to a group of employees and it’s impracticable to work out the exact cost per person)
  • benefit is not cash or a cash voucher
  • employee is not entitled to the benefit as part of a contractual obligation (including under salary sacrifice)
  • benefit is not given in recognition of particular services performed by the employee as part of their employment duties (or in anticipation of such services)

Where the employer is a close company and the benefit is given to an individual who’s a director or other office holder of the company (or to a member of their family or household) the exemption is capped at a total cost of £300 in the tax year.

Section 210 SI No 2080 2000

If any of these conditions are not met then the benefit is taxed in the normal way, subject to any other exemptions or allowable deductions. The exemption applies equally to benefits given to the employee or to the employee’s family or household.

Welfare counselling


The benefit of welfare counselling made available to all employees generally on similar terms is exempt from tax. For this purpose welfare counselling does not include:

  • any medical treatment
  • advice on finance or tax (other than debt counselling)
  • advice on leisure or recreation
  • legal advice


Section 250

There’s a wide statutory exemption for payments or reimbursements, by employers or third parties, of expenditure on the provision of work-related training.

However, any payment or reimbursement of training costs which has as its purpose:

  • an intention to reward the employee
  • the provision to the employee of an employment inducement (for example, to take up a new job)
  • allowing the employee to enjoy the facilities or benefits for entertainment or recreational purposes unconnected with ‘work-related training’

These will remain taxable.

The rules provide for the following:

  • expenditure which is incurred for a mixed purpose (part-reward, part-training) will need to be apportioned – apportionment is not necessary just because an element of genuine training is enjoyable or recreational, for example, the incidental use of a hotel’s swimming pool and leisure facilities during a residential course will not require apportionment
  • exemption applies to both internal and external courses
  • there’s no territorial limitation on the location at which training is undertaken
  • exemption extends to a range of training materials including audio or video tapes and compact or floppy disks
  • exemption applies not only to the cost of providing qualifying training, but also extends to related costs, such as the cost of additional childcare and the travelling and subsistence costs of the trainee
  • the definition of work-related training includes training which is linked to charitable and voluntary activities
  • the exemption from tax is mirrored by a National Insurance contribution exemption
  • incidental overnight expenses can be paid tax-free to employees on training courses in the same way as such expenses can be paid tax-free when an employee is away on business
  • generally, the exemption does not extend to the cost of giving the employee with, or with the use of, any asset once the training has ended – exceptions are dealt with in Appendix 9

More information and guidance about the exemption for work-related training is given in Appendix 9.

Workplace nurseries and other employer-supported childcare


Sections 270A, 318 and 318A

Since 6 April 2005 new rules have applied to the provision of childcare benefits and childcare vouchers. Changes were made to employer-supported childcare in April 2011 and subsequently in October 2018. See Appendix 11 for details.

Published 30 December 2019
Last updated 9 March 2021 + show all updates
  1. The 'Payments towards additional household costs incurred by employees who work at home' section has been updated.

  2. First published.