Institute welcomes extension of employee benefit tax breaks and calls for them to go further 

But the CIOT is calling for the government to go further and treat all employer reimbursements in the same way for tax purposes as if the employer had directly provided the benefit in question. 

The changes in respect of eye tests and glasses, home working equipment and flu vaccinations were announced in the Budget on 26 November and will be legislated for in the Finance Bill published on 4 December. The changes will take effect from 6 April 2026.  

Ellen Milner, CIOT Director of Public Policy, said: 

“We welcome this legislation, which will exempt a number of minor benefits-in-kind from income tax and National Insurance. The CIOT has previously recommended introducing these changes and we are pleased to see that the government is acting to remove from taxation low value benefits that are a common part of modern working life. 

“The extension of the exemption for eye tests and glasses corrects an anomaly in existing legislation that only allows an income tax exemption when an employer directly pays for these or provides a voucher. The existing situation is contrary to our understanding of the original policy intent, which was to also permit tax-exempt reimbursement by an employer of costs that an employee has directly incurred. 

“It is often administratively less burdensome for an employee who works from home to purchase the equipment they require to work from home, rather than the employer buying it and having to coordinate delivery. The tax exemption for home-working equipment will enable employers to reimburse employees for the full equipment costs they have directly incurred – with no tax charge – where that equipment is necessary for the employees to perform the duties of their employment. 

“Many employers provide vaccinations such as annual flu jabs to their employees. Until now they’ve had to rely on the trivial benefits exemption to exempt the costs, and this only applies where the employer directly pays for the jabs or provides a voucher. The exemption for vaccination costs will make it easier for smaller businesses, which are less likely to be able to arrange for a nurse to visit the workplace or to obtain vouchers for immunisations, to cover the costs of flu jabs for their employees.” 

The CIOT believes that tax exemptions should apply equally to employees’ benefits where the cost is reimbursed by their employer as where their employer provides that benefit directly. Under current rules, a range of benefits-in-kind (for example health screenings and medical check-ups) are exempt from income tax and National Insurance on the employee if they are paid for directly by employers, or via a voucher scheme arranged by the employer. However, if the same benefits are paid for by an employee and later reimbursed by their employer, the reimbursement is treated as part of the employee’s taxable earnings and they find themselves facing an additional tax charge as a result. 

Ellen Milner added: 

“Whether a benefit-in-kind or expense is tax exempt should be determined by its nature rather than being based on whether the employer directly pays for it or reimburses an employee who has paid for it. This difference in tax treatment can particularly affect smaller employers who, for example, may find it harder to set up corporate accounts or enter into voucher agreements with suppliers to pay for minor benefits directly.  

“So, while these changes are welcome, we think the government should go further and remove this anomaly so that employer reimbursements are treated in the same way as directly provided employer benefits and are eligible for the same exemptions. This would simplify life for businesses, employees and HMRC.” 

ENDS