Salary or salad? You can feast on tax breaks with canteen credits

You might scoff but the Eat at Work scheme is just one of the valuable benefits that some employers offer on their remuneration menus

Fancy a tax-free taco for lunch? Or how about fish and chips without the national insurance contributions (NICs)?

The staff canteen, not usually the home of personal finance planning, is an increasingly popular choice for companies wishing to provide perks to foster staff loyalty.

The Swiss food giant Nestlé will next month become the latest to offer a government-backed tax break to its UK employees. The Eat at Work scheme, based on the principle of "salary sacrifice", allows staff to give up a small chunk of their untaxed salary each month in exchange for a food and drink "credit" to be used in the canteen. In effect, this saves them paying some tax and NICs.

Here's how it works. Say you spend £5 a day in the canteen; instead of paying roughly £100 a month from your taxed salary, you swap this sum from your gross pay for a pre-paid credit that you can then use in the workplace.

This represents an annual tax saving of £387 for those paying basic-rate tax, or £481 for higher-rate earners. The employer also saves on the NIC contributions it would otherwise have had to pay on that part of your salary.

Under the 2003 Income Tax (Earnings and Pensions) Act, free or subsidised meals can be exempt from tax if provided for all employees. While many will dismiss such perks and argue that employers should simply pay higher salaries, it's still a good idea to check out the full range of benefits that your company has to offer.

Flexible working

Aside from the company pension - which, as a rule, nearly all employees should take advantage of to benefit from the tax breaks and any employer contributions - the most popular office-related benefit is "flexible" working. Nearly half of all UK companies now offer the choice of flexi-time or homeworking for at least part of the week. The former arrangement lets you come and go as you please provided you put in a minimum number of hours each month. An alternative is to compress your con- tractual hours, say by working the same time over four days rather than five.

Another popular choice is job-sharing, where two people divide up the hours and responsibilities of one job and receive the same pro rata salary. Watch out, though: this can affect your state pension entitlement as well as your private pension provision since you'll be paying less in NICs.

Save as you earn

As far as job perks go, setting aside a chunk of your monthly salary to buy shares in the firm you work for probably doesn't sound like the most enticing offer on the table. But "share-save" schemes carry tax breaks and let you buy into the stock market - usually at a 20 per cent discount, to take advantage of anticipated future price increases.

Major companies that offer such schemes include the supermarket giants Tesco and J Sainsbury and Royal Mail. There are three share-save schemes available but the most popular is save as you earn (SAYE).

Staff first decide how long they want to save money for - usually three or five years - and how much is to be deducted from their salary each month, ranging from £5 to a maximum of £250. A "start" date is then noted, from which the clock will be ticking on your company's share price.

For example, say you had started paying into an SAYE plan in April 2004, when the share price was £5, and after three years, the price is now nudging £7. This means that, with a 20 per cent discount per share on the 2004 price, you can use the cash you have saved to buy shares worth £7 at the very attractive price of £4. At this point, you can sell the shares straight away at a profit or, if you're confident they'll rise further in value, keep them.

You'll have to pay capital gains tax if you sell but, unless you've made a profit of more than £9,200, your annual allowance will cover this.

Don't forget, though, that SAYE carries a risk. That discount on the price at the time you bought your shares will be of value only if they have risen in the meantime. If your company has had a rough time from investors and the markets, an option to purchase shares at a higher price than they are currently being traded will not seem like much of an offer. However, in this case, SAYE does have a safety net of sorts: should the share price tumble, you can take away the money you've saved tax-free with a cash bonus on top.

Details of any share plan should be provided when you join a new company. Even so, it's easy to overlook benefits like this. Ask your personnel department for information.

There are some 6,000 share-save schemes in the UK but, on average, only half of the staff eligible to join do so, according to ifsProShare, a not-for-profit organisation that encourages share ownership.

Childcare vouchers

For many people, the most important work-related benefit will be one that helps with the cost of looking after their kids. Through NIC exemption and income tax relief, a voucher scheme allows employers to contribute to their employees' childcare costs.

In a nutshell, these costs are deducted from your monthly salary and turned into vouchers that you use to pay a registered nursery or childminder. The vouchers can be used only for government-registered, approved nurseries and childcare providers, meaning that those who have informal arrangements with friends and family members miss out.

Worse, the lower NICs paid by those receiving childcare vouchers could jeopardise their future entitlement to work-related benefits such as sick pay and also occupational pensions - depending, of course, on how much employees pay into these.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

PROMOTED VIDEO
News
Sarah Silverman (middle) with sister Reform Rabbi Susan Silverman (right) and sister actress Laura Silverman (left) at Jerusalem's Western Wall for feminist Hanuka candle-lighting ceremony
peopleControversial comedian stages pro-equality Hanukkah lighting during a protest at Jerusalem's Wailing Wall
Sport
After another poor series in Sri Lanka, Alastair Cook claimed all players go through a lean period
cricket
News
i100
Arts and Entertainment
The Bach Choir has been crowned the inaugural winner of Sky Arts’ show The Great Culture Quiz
arts + ents140-year-old choir declared winner of Sky Arts' 'The Great Culture Quiz'
Life and Style
food + drink
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

    $200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

    Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

    $125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

    Sheridan Maine: Commercial Finance Manager

    Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

    Sheridan Maine: Regulatory Reporting Accountant

    Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

    Day In a Page

    Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

    Homeless Veterans appeal

    In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
    Could cannabis oil reverse the effects of cancer?

    Could cannabis oil reverse effects of cancer?

    As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
    The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

    The Interview movie review

    You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
    Serial mania has propelled podcasts into the cultural mainstream

    How podcasts became mainstream

    People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
    Jesus Christ has become an unlikely pin-up for hipster marketing companies

    Jesus Christ has become an unlikely pin-up

    Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
    Rosetta space mission voted most important scientific breakthrough of 2014

    A memorable year for science – if not for mice

    The most important scientific breakthroughs of 2014
    Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

    Christmas cocktails to make you merry

    Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
    5 best activity trackers

    Fitness technology: 5 best activity trackers

    Up the ante in your regimen and change the habits of a lifetime with this wearable tech
    Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

    Paul Scholes column

    It's a little-known fact, but I have played one of the seven dwarves
    Fifa's travelling circus once again steals limelight from real stars

    Fifa's travelling circus once again steals limelight from real stars

    Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
    Frank Warren column: 2014 – boxing is back and winning new fans

    Frank Warren: Boxing is back and winning new fans

    2014 proves it's now one of sport's biggest hitters again
    Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

    Jeb Bush vs Hillary Clinton

    Karen Tumulty explores the power dynamics of the two first families
    Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

    Stockholm is rivalling Silicon Valley

    The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
    Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

    Crucified Santa: Urban myth refuses to die

    The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
    Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

    The Boy in the Dress: On set with the stars

    Walliams' story about a boy who goes to school in a dress will be shown this Christmas