Ahead of the Budget, several groups called for changes to how employment expenses and benefits are treated for Income Tax and National Insurance purposes. The Chancellor has taken forward some of these suggestions, but others have either not been taken on board or have been moved in the opposite direction.

All change for specific benefit exemptions

The Budget announced new tax exemptions for flu vaccines, eye tests and homeworking equipment. Employers often rely on the trivial benefit rules to provide flu vaccines tax free, and there are, currently, specific exemptions for eye tests and home working equipment.

However, all three exemptions only cover a situation where the employer pays the costs directly or gives a non-cash voucher to the employee to allow them to pay for these items. There is no Income Tax or National Insurance relief available where the employee is reimbursed. That is all set to change from 6 April 2026.

In future, there will be specific exemptions covering flu vaccines, eye tests and home working equipment. In what appears to be a victory for common sense, the new exemptions will apply both where flu vaccines, eye tests and homeworking equipment are paid for directly or are reimbursed to the employee.

It is important to bear in mind that the new exemptions do not extend to COVID vaccines, which some employers may wish to offer to their staff as well as flu vaccines.

The new exemptions will make it much easier for employers to provide flexibility and avoid tax and National Insurance issues where they are providing these benefits, which in the case of eye tests could be a legal requirement if the employee is required to use a computer screen for their work. 

But it’s not all good news!

Whilst home workers may benefit from the extension of the exemption for home working equipment, many of them could be affected by a move in the opposite direction in the removal of tax relief on non-reimbursed home working expenses from 6 April 2026.

This will create a two tier approach for home working expenses, as employers who reimburse their employees can continue to do so without having to deduct Income Tax and National Insurance. But employees who are not reimbursed by their employer will no longer be able to claim tax relief from HMRC.

We understand that there has been an increase in claims for tax relief where none is due, such as where the employee chooses to work from home or splits their working week between their home and their employer’s premises. However, genuine claimants may nevertheless feel that the change is unfair, as they may be incurring additional home energy costs as a result of working from home.

Employers who do not currently reimburse their home-based employees for their home working expenses might want to consider doing so in future, as relief will still be available in this situation.

Overall, the Budget was very much a mixed bag for employment benefits and expenses, with some positive moves forward but other areas where progress could still be made in the future. The ATT would like to see the Government consider changes to mileage rates paid to employees for travel in their own vehicle and consider increases to the £150 per head allowance for annual events and the £50 threshold for trivial benefits.

This article reflects the position at the date of publication shown above. If you are reading this at a later date you are advised to check that that position has not changed in the time since.  

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