Common Benefits: Phones, Bikes, Training, and Social Events

Providing benefits to your employees can be a tax-efficient way to reward your team, but the tax rules vary depending on what you offer. This article explains how HMRC treats common workplace benefits including mobile phones, cycle schemes, training, and social events — and when you'll need to report them or pay tax.

Mobile phones

You can provide one mobile phone to each employee without creating a tax charge. This means you don't need to report it to HMRC, and neither you nor your employee will pay tax or National Insurance on it.

The exemption covers the phone itself, the line rental, and the cost of any private calls. It also extends to smartphones, as these count as mobile phones for tax purposes.

One phone can include two connections to the same number (such as a SIM card in a handset and another in a hands-free car kit), but two connections to different numbers count as two separate phones.

You can actually provide more than one phone without creating a tax charge if you give additional phones solely for business use and private use is not significant. However, if you provide two phones for private or mixed use, only one qualifies for the exemption and the other becomes a taxable benefit.

If you give a mobile phone to a member of an employee's family or household, this is always taxable unless that family member is also your employee in their own right. Similarly, if you give money to an employee to use their own mobile phone, this counts as taxable income.

Important: These rules changed from 6 April 2017. If a mobile phone is provided through a salary sacrifice or optional remuneration arrangement made after this date, the tax exemption does not apply.

Cycle to work schemes

Lending or hiring bikes to your employees is tax-free, provided the bikes are available to all employees and are mainly used for getting to work. When this applies, you don't need to report anything to HMRC and there's no tax or National Insurance to pay.

You can set up a formal 'cycle to work' scheme to encourage employees to travel to and from work by bike. These schemes typically allow employees to hire bikes through salary sacrifice arrangements.

Work-related training

Training expenses are tax-free when the training is work-related. This exemption covers the cost of the training itself plus related costs such as books or travel expenses while training.

For work-related training, you don't need to report anything to HMRC or pay tax and National Insurance.

If training is not work-related, you'll need to report it and pay tax and National Insurance. The treatment depends on who arranges and pays:

If you arrange and pay for the training: Report the cost on form P11D and pay Class 1A National Insurance.

If you pay for training arranged by the employee: Report the cost on form P11D and pay Class 1 National Insurance (but not PAYE tax) through payroll.

If you reimburse an employee who arranged and paid for the training: The reimbursement counts as earnings. Add it to the employee's other earnings and deduct PAYE tax and Class 1 National Insurance through payroll.

Annual parties and social events

You can provide tax-free annual events such as Christmas parties or summer barbecues, as long as certain conditions are met.

To qualify for the exemption, the event must:

• Be annual (such as a Christmas party or summer barbecue)
• Be open to all your employees
• Cost £150 or less per person

The exemption also applies to online or virtual parties.

If your business has multiple locations, an annual event open to all staff at one location still qualifies. You can also run separate parties for different departments, provided all employees can attend at least one event.

Multiple events: You can hold more than one annual event in the tax year as long as the combined cost doesn't exceed £150 per head. For example, you could host a summer barbecue costing £80 per person and a Christmas party costing £70 per person, and both would be exempt.

If the combined cost of all annual events exceeds £150 per head, you must report and pay Class 1A National Insurance on the full cost of any events that take you over the limit. You can choose which event(s) to count as exempt up to the £150 threshold, but any costs above this must be reported on each employee's form P11D.

Salary sacrifice arrangements: If social events are part of a salary sacrifice arrangement made after 6 April 2017, you must report the value to each employee. If the event costs less than the amount of salary given up, report the salary amount instead.

Key takeaways

Many common employee benefits can be provided tax-free when you follow HMRC's rules. One mobile phone per employee, bikes used mainly for commuting, work-related training, and annual parties costing up to £150 per head are all exempt. Understanding these exemptions can help you reward your team cost-effectively while staying compliant with your reporting obligations.

Sources

• Expenses and benefits: bikes for employees
• Expenses and benefits: training payments
• Expenses and benefits: social functions and parties
• Company mobile phones (480: Chapter 22)

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.