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Patrick Crookes and Ian Goodwin

Mazars

The tax implications for supporting your staff during the cost-of-living crisis

Guest blog by Mazars 

Many charities are looking at ways to help their employees with their cost-of-living pressures and we’ve seen some of our clients use various measures to enhance net pay for staff.

At Mazars we are providing advice on practical factors to bear in mind when considering how these changes can be implemented, including the tax implications. Just some examples include:

 

1. Employee expenses (including mileage payments)

The impact of rising fuel costs has led many organisations to consider if their expense policies, especially mileage rates and travel allowances, are sufficient to reimburse employee expenses.

If you are increasing your mileage rates for company car or own car drivers, it’s important to be mindful of the HMRC approved rates that allow these expenses to be paid tax and NIC free. Where organisations pay in excess of these rates (without HMRC agreement), then tax and NIC implications will arise for both the employee and employer, which should be considered before changing policies.

For those employees who are working from home, employers can pay up to £6 a week tax and NIC free to help with the extra costs. If this limit is exceeded, tax and NIC will be payable.

 
 

2. Apprenticeship Levy

Did you know that all employers in England can use Apprenticeship Levy funding to cover training costs for employees undertaking qualifying training courses?

Large employers (where their own or their group’s pay bill exceeds £3 million a year) can use their Apprenticeship Levy pot as ‘levy payers’ to fund qualifying expenditure on apprenticeship training. This will be the amount of levy paid for qualifying employees in England, as well as a government top up of 10%. 

Smaller employers (where their own or their group’s pay bill is less than £3 million a year) can share the cost of training and assessing their apprentices with the Government, through ‘co-investment’. This scheme allows smaller employers to receive funding of up to 95% on qualifying training costs for employees engaged in apprenticeship agreements.

No employer NIC will be payable for salaries paid to employees working via apprenticeship agreements under the age of 25, as earnings are lower than the Upper Earnings Limit, less than £967 per week or £4,189 a month from 6 April 2023.

You might also be able to get an additional payment of £1,000, depending on the apprentice you hire.

 
 

3. Pension salary sacrifice

For employees earning above the National Minimum and Living Wage (NMW), using a salary sacrifice arrangement for some benefits, such as enhanced employer pension contributions, can lead to increased net pay due to the NIC savings generated. 

There will also be savings for the employer due to the reduction in their NIC payable too. This is, therefore, a very popular arrangement to help individuals save for their retirement in the most cost-effective way.

Read the full article for more ways to support your employees with their cost-of-living challenges.


Mazars is an international, integrated and independent firm specialising in audit, accountancy, advisory and tax services.

For financial advice always seek an independent financial advisor. The information provided by Mazars is their own advice, CAF does not endorse any claims/advice made.