Cost of living Payment from small employer

Laranja

As a small company with 25 staff we are looking at giving staff £500 to help with the cost of living. However because of tax and national insurance the amount that gets to the staff is approx 70% as the other 30% goes to the government in tax and national insurance. How can I pay the money so the total goes to the staff or is the government going to put in place an exception to enable these payments to be made tax and NI free.

Is anyone else in the same position

Jeremy535897

There is no way of paying an amount to employees to cover the cost of living free of tax. Paying for the cost of living is why they work for you and earn taxable wages.

Grumpy_chap

Laranja said:

As a small company with 25 staff we are looking at giving staff £500 to help with the cost of living. However because of tax and national insurance the amount that gets to the staff is approx 70% as the other 30% goes to the government in tax and national insurance. How can I pay the money so the total goes to the staff or is the government going to put in place an exception to enable these payments to be made tax and NI free.

Is anyone else in the same position

That amount that reaches the staff in person is roughly the same as for the bulk of the salary packet (assuming the staff are beyond minimum thresholds).  To make a payment so the staff receive £500 in their take-home pay, you will need to make a company payment of £700 - £750.

Laranja

I am aware of the tax and national insurance implications, but object to paying a cost of living rise to the government. 

sheramber

There is no such thing as an official cost of living payment.

You are paying an additional salary payment.

macman

Pay yourself a higher dividend, and then gift £500 fo each rom your own personal account, so not as a salary bonus?
Whether HMRC would swallow that one, I have no idea.

savingsavvysurfer

That's very kind of you to think of doing that for your employees. From what I've read there isn't a way to get around paying them the extra without them getting taxed, as it would likely be treated the same as bonuses. 

Laranja

Should the government set up such a scheme?

Grumpy_chap

Laranja said:

Should the government set up such a scheme?

No.           

Laranja

Why shouldn't they, it then gives smaller employers the option to help their staff

Albermarle

When I was working they gave everyone in the sales dept a gift ( for winning an award ). You could buy your own gift and claim back the cost up to about £500 I think, although the gift had to be something techy, like a laptop or smartphone, or a printer.
I think the reasoning was that most of the dept worked from home some of the time, and it could be argued it was something connected with that, if the taxman came looking. Most people had all these things supplied by work anyway, so it seemed a bit like skating on thin ice to me, tax wise. It was a big company though and they had investigated it beforehand.