What pay includes
Expenses and travel
Payments towards the cost of travelling
If an employer makes payments to their employees for non-business journeys, this is generally taxed as pay. Travel to and from work is considered a non-business journey.
If an employee has a company car, and the employer makes payments towards the car running costs, the costs:
If the employer makes payments for business travel, this will generally not be taxed as pay. The payment must be made in line with the guidelines set out in Travel and subsistence.
Payment of taxi fares
Where the employer pays taxi fares for their employees in respect of non business journeys, this is generally taxed as pay. If the taxi is shared by more than one employee, the taxable amount should be split equally.
Taxi fares paid by the employer are not taxable pay where either of the following apply:
1. Provision of taxi transport on an irregular basis
- an employee has to work until after 22.00 and finishes before 06.00
- the taxi is paid from work to home only
- and
- they are provided irregularly (no more than 60 journeys per year).
The exemption does not apply to individuals who work late as part of their normal working pattern.
2. Provision of taxi transport for a disabled employee
Taxi fares paid by the employer are not taxable pay if an employee has:
- a disability that has a significant and long-term effect on the employee’s ability to carry out normal day to day activities
- or
- difficulty using public transport.
This applies for journeys both to and from work. Additionally, where a staff member is unwell and is sent home in a taxi, this is not taxable pay.
Payment of travel pass
If an employer has provided an employee with a travel pass, see Travel passes or air miles for more information.
Provision of a bus service
Where an employer provides a bus service to transport employees to and from work, it will not be taxed as pay if the service is:
- available to employees whether they use it or not
- for journeys between home and work
- or
- for journeys between workplaces.
Other amounts
The employer can make other payments to employees such as:
- round sum expense payments to employees and directors
- or
- tips, including credit card tips, received from customers.
The employer must treat these payments as pay, and tax them in the normal way.
Note
If employees receive tips directly from customers, they must declare this income on their tax returns.
Next: Lump sum payments