5 Tax Free Benefits for Staff in 2025/26

Tax on small businesses continues to rise and in particular this year the cost for employers has increased significantly.   In this article we’ll look at 5 tax efficient ways to reward employees in 2025/26…… and remember Directors are employees to so these all apply even if you are the only employee at your company. 

The following can be paid for by the company and provided tax free to all employees!

You should be aware that eye tests and glasses or contact lenses specifically prescribed for display screen work are tax deductible, but did you know tat health screening and medical check-ups are also deductible. 

Health Screening Assessment:

This is an evaluation designed to identify employees who might be at particular risk of ill-health.

Examples include questionnaires or interviews about general health and lifestyle, aimed at identifying higher-risk employees who may then be referred for further medical checks.

Medical Check-up:

This refers to a physical examination conducted by a health professional to determine the employee’s state of health.

It is limited to assessing the employee’s health and does not include any medical treatment.

Caveat – must be available to all employees, does not include family members!

Certain counselling services provided as part of an employer’s welfare program, such as Cognitive Behavioural Therapy (CBT) or Interpersonal Therapy, are exempt from tax.

CBT is commonly used to treat mental health issues, behavioural issues, physical health conditions with psychological impact and other conditions such as stress management.

CBT is typically a short-term therapy, lasting between 6 to 20 sessions, depending on the condition and severity. Sessions are usually held weekly and last about 50 minutes.

Delivery of therapy and be individual group, online or via self-help.

Medical treatment funded by the employer to help an employee return to work after a health-related absence, up to a maximum of £500 per tax year. This must be recommended as part of occupational health services.

Relevant life cover is exempt from income tax, national insurance and is tax deductible for corporation tax purposes. 

To qualify for these tax benefits, the relevant life policy must meet the following conditions:

• The policy must only provide a lump sum benefit in the event of the employee's death (or terminal illness in some cases) during their employment.
• The policy must not have any surrender value (i.e., it cannot be cashed in).
• The policy must be written in trust, ensuring the payout goes directly to the employee's beneficiaries and not to the employer or the employee's estate.

Most Independent Financial Advisors will be able to provide relevant life cover. 

You can find our more detailed articles on Staff Gifts (here) and Staff Parties (here) but here’s a quick reminder.

Gifts

When gifting your employees, a little planning can go a long way in avoiding unexpected tax issues.

• Non-cash gifts worth £50 or less are exempt from tax and National Insurance Contributions (NICs) under HMRC’s trivial benefits rule.
• If the gift exceeds £50 or doesn’t meet the trivial benefit criteria, it may be taxed as a BIK, potentially costing your employees.

Parties

The annual staff events exemption means you can spend up to £150 per head without worrying about tax implications.

Top Tips for a Tax-Smart Celebration

• Stick to the £150 Rule: Plan your budget to stay within the threshold.
• Be Inclusive: Make sure the event is open to all employees.
• Track Every Expense: Include every cost when calculating the per-head amount.