HELP - USELESS WITH THINGS LIKE THIS - GYM MEMBERSHIP, SALARY SACRIFICE AND TAX

[TheDogIsInCharge]

Apologies for my financial illiteracy.

I'm debating about getting a gym membership through my work's "perks" system. But I'm trying to work out if it just means I end up paying the "saving" in more tax as it is considered a taxable benefit.

Normal gym membership is £75 a month for anytime use.
Through my work's scheme it is £64 a month for the same.

BUT, if this is a taxable benefit, will it mean that the £11 a month saving will mean paying enough extra tax that I may as well do this out outside my work's scheme?

One of the negatives is that, should I do it through my job, I am liable for the year's balance which they they take out of my final pay which is not great really. I'm not intending on leaving but you never know...

Any people much more knowledgable about this sort of thing?

It’s just a discount isn’t it? No reason why a discount offered by the gym would be a taxable benefit

I thought a tax deductible benefit was something paid for by the employer eg a company car you get to use. This is just an incentive offered by the gym. However I'm no expert.

It says that it is a taxable benefit in the terms and conditions on my company's website on the "would you like a discounted gym membership as part of your perks" kind of thing hence why I don't think it is just a discount. It is a salary sacrifice thing.

Do you pay direct from your salary before tax ?

also to clarify, it isn't just the one gym offering a discount to a local firm. It is an international employer and this perk is for a whole variety of gyms across the country via a third party "dealer."

Yes I would do

This may help
https://www.taxinsider.co.uk/friendly-perks-tax-efficient-benefits-in-kind-ta#:~:text=Benefits%20are%20generally%20tax%2Ddeductible,case%27%20for%20the%20employer%27s%20expenditure.

I think you probably need to speak to your payroll team who hopefully should be able to advise as from the HMRC site it looks like they would have to tax you at source.https://www.gov.uk/expenses-benefits-sporting-recreational-facilities/whats-exempt

hmmm it isn't on the tax exempted list.

I was just a bit shocked at the tax I had to pay on the private health insurance that is also a "perk" but which I shell out quite considerable amounts for every month (and which has been as much use as a chocolate toothbrush when I have actually wanted to use it this year for my kids).

If your employer pays something for you (like medical insurance) you'll pay tax on the amount they pay. So if your medical insurance is £1000 a year, and you're a 40% taxpayer it'll cost you £400 in additonal tax.

Salary sacrifice is usually taken out before tax, and you're sacrificing salary in exchange for something else (like childcare vouchers, pension etc). Usually the benefit to you is that you no longer pay tax on that money. So £100 a month comes out, but you pay £40 less in tax so it has only cost you £60 compared to the position you would have been in before.

I can't quite wrap my head around salary sacrifice for something taxable. Ask whoever processes your payroll to explain it.

Gymflex? I use this and it does work out cheaper. Generally you get a discount from the gym then another "discount" as it comes out of your salary pre-tax.

I pay £60 a month for mine, the normal fee is £75. Then a little bit more as it's from my gross wage. I haven't had any issues with it. Effectively work have loaned me the money to pay for the gym and I'm paying it back, rather than them paying for it and me having to pay tax.

This is what I can't wrap my head around - I will pay tax on it but I pay for it - my employer doesn't! Or maybe they pay that £11? And maybe on the health insurance they pay some of it and that then means I get taxed even though I pay most of it?

I guess they also get some tax breaks on this too...

So you don't have to pay extra tax?

Why would it say there is? This is what is confusing me...

I may be far too wary as I had the tax office after me in quite a horrendous way in the past - despite them owing me thousands. It took the best part of a year to get it sorted and to get any money back. It was all down to the company payroll messing up in a frankly disastrous manner for years. During this time I had my second child just as HMRC were sending me letters demanding over five grand and talking about distraint procedures and repossessing my valuables... all while I was PAYE and had actually overpaid for several years.

If you salary sacrifice there's no cost to the employer - it's coming out of what they pay you anyway so no additional deduction for them.

If they pay for stuff on your behalf and you pay the tax on the benefit then yes, they do get a deductible expense but corporation tax is low, only 20%ish. It's incredibly unlikely to be worth their while to provide any benefits at all from a financial perspective - it is all just extra cost and admin. So chances are they are doing it to try and be a good employer.

Ahh ok - to be fair they are a great employer. Nothing to complain about. Great values.

I'm just trying to work out the financials... will the £11 saving - which is actually more because it comes out of my salary pre tax - not be eaten up by the extra tax I then end up paying.

It's probably so little I need to stop worrying about it!

Not worth it. They are offering a £75 benefit for a total cost of £76.80 once you have paid the tax. You are losing out. Meanwhile the employer makes a significant saving because each employee who agrees to this ends up with a slightly lower salary for National Insurance purposes so the company's NI dues are smaller.

It's definitely worth it to do the more "official" salary sacrifice things like buying a bike, car or computer which have specific tax-free plans

THANK YOU.

This was exactly what I was looking for. The same gym is doing a deal with one month free at the moment but I might ring up and see if there is any other tweaks that can be done. Don't ask, don't get!

It used to be that sal sac was more popular because generally, the taxable value of benefit was less than the taxable value of salary given up - most people would be neutral or slightly better off overall. Employees could generally use purchasing power to buy in a lower price than individual employees could obtain. That's changed now, under the Opra rules, so you'll be taxed on higher of benefit or salary given up. There may be a very small NIC advantage for you (employees don't pay NIC on non cash benefits although employers still pay their NIC on non cash benefits) but ultimately if the price you could independently source this is close to the sal sac, the monetary value to you is going to be marginal.

If the benefit costs them £64 a month then that would be the benefit value, doesn't matter if that's the discounted price that's what they're paying. So under OpRA rules (taxed higher of benefit or amount sacrificed) then it would be £64. Then you would have the made good amount of what you've sacrificed surely. So that would end up as a nil taxable benefit