This year's budget has seen relatively minor changes to the tax treatment of employees. The most significant changes are:
Home Computing Initiative
- it is currently the case that where an employer provides an employee with a computer for private use at home, the first £500 of annual benefit in kind is exempt from tax. See "Home Computers for Employees - Tax Issues" for more details. From 6th April 2006, this exemption will no longer be available and the whole amount of the benefit in kind will be liable to tax. One will continue to be able, however, to reduce the value of the benefit in kind by taking into account any use of the computer for work purposes. HM Revenue & Customs have, however, confirmed that the exemption will continue to apply where the employee has been provided with the home computer for private use before 6th April. This includes the situation where an employer has entered into an arrangement with an employee under which the employer is committed to providing a computer to the employee, but for reasons beyond the employer's control, the employee cannot take physical possession of the computer until 6th April or later.Loan of mobile phones to employees
- an employer can at the moment loan a mobile phone to an employee or a member of the employee's family or household for private use without the employee becoming liable to pay tax on the benefit in kind which arises. This exemption includes the cost of line rental and any private calls paid for by the employer on that telephone. There is currently no limit to the number of mobile phones that can be loaned, nor a financial limit on their value. From 6th April 2006, this beneficial tax treatment will be restricted to one mobile phone per employee and will no longer extend to members of the employee's family or household. As is the case with the provision of home computers to employees, it is proposed that the exemption will continue to apply where the employee or member of the employee's family or household was first provided with the mobile phone before 6th April.Amendments will also be made to the legislation to ensure that where employers have chosen to use vouchers as the mechanism for making the mobile phones available to their employees, this difference in mechanism will not affect the tax and NICs position.
Childcare Vouchers
- one bit of good news for employees is that the weekly exempt amount for childcare vouchers (and other directly contracted childcare) will be raised from £50 to £55 per week with effect from 6th April 2006. The equivalent monthly amount will be £243, up from £217 for the 2005/2006 tax year.Eye tests and glasses for VDU users
- it is currently the case that where an employee is required to use a visual display unit as part of his or her normal duties, no chargeable benefit will arise on the provision or meeting the costs of (i) an eye test, (ii) the cost of glasses required solely for VDU use or (iii) where glasses are for general use, but include a special prescription for VDU use, a proportion of the cost relating to the special prescription. (The provision or payment towards the cost of glasses for general use, including use with a VDU, which do not include a special prescription for VDU use, will give rise to a taxable benefit.)The law will be changed to ensure that the exemption from tax charge also applies where the eye tests and/or glasses are provided by means of a voucher, rather than reimbursing the cost to the employee.
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