Could a low-cost universal wellbeing tax break bring benefits for the UK government, employers and employees? Steve Herbert, co-host of the Benefits Unboxed podcast and a veteran HR and employee benefits commentator, says there’s a deal to be done.
Much has been written and said about Donald Trump’s ability to do deals. And much as we might hate to admit it, he has a point that doing deals is an art.
For doing deals is a key component of both good business and good government. And that rule applies equally on this side of the Atlantic and is one that the UK government should perhaps consider as we commence the run-in to the 2025 Budget statement.
The need for a good deal in both the business and wellbeing space is particularly true when we ponder the clumsy political missteps made by the chancellor last year.
Budget 2024
In 2024 the newly elected Labour government looked at the nation’s finances and correctly calculated that there was little option but to raise taxes.
The challenge for the new administration was how to increase revenue given that they had made manifesto promises not to increase income tax, employee national insurance, and VAT. Collectively these three taxes represent almost two-thirds of revenue income each year and the most effective levers to raise revenue fast, easily, and equitably.
With personal taxation off the table the government instead looked to business for revenue raising measures. The employer’s rate of national insurance jumped from 13.8 percent to 15 percent and the starting threshold level for such payments was lowered dramatically. The government also announced a significant increase to national living wage rates, another burden entirely shouldered by employers.
This employment treble-whammy has contributed to another disappointing year of economic growth and a slowdown in job vacancies and recruitment. These decisions have, inevitably, also rather strained the relationship between business and government. Yet a good deal for both sides in the next Budget statement could go some way to bridging that divide.
And the art of the deal is to deliver at least some of what both parties want and need.
Government perspective
In the case of the government the main priority remains economic growth. If achieved, this will bring increased tax income and the much-needed spending power to better fund important public services.
And chief amongst those public services is another key manifesto priority for the government, the National Health Service (NHS). Progress on tackling NHS reform and waiting lists has been made, but it will be far easier to continue the good work if the flow of new patients into the system could be curtailed. And this desire to move the NHS from “sickness to prevention” is now one of the stated aims of the government.
The employer perspective
Whereas UK businesses primarily need to deliver corporate growth.
There are many government incentives (such as infrastructure investment) that would help employers achieve this longer-term aim, yet quick wins are also needed to kickstart more immediate growth. One such win would be to minimise worker ill-health absence and its direct impact on business continuity and that all important bottom-line. This is particularly important for the vast majority of employers who are still reliant on the NHS to treat some or all of their workforce should they become ill.
This problem is apparent when we look at treatment waiting times. The British Medical Association (BMA) statistics suggest that today treatment typically takes more than a quarter of a year (13.4 weeks) to begin, almost twice the pre-pandemic wait times.
The art of the deal?
The obvious landing point for a deal here are the areas of commonality for both sides.
If the government can help employers keep employees fit, healthy, and (importantly) at work then this will boost the employer’s bottom line, increase tax revenues, and reduce pressure on the NHS.
Not only that but a good deal for employers would represent a welcome olive-branch to bridge the divide between business and government following the 2024 Budget announcements.
Yet how to deliver that good outcome when HM Revenue coffers are bare?
Cost neutral?
The answer for the chancellor might be to simplify an overly complex and very misunderstood patchwork of current smaller tax incentives around employee wellbeing.
At present there is much employer confusion about the tax treatment of many employee benefits, and particularly the employee’s benefit in kind liability when a company-paid offering is made use of by any individual worker. As a result, many of these potentially important offerings are either unavailable or remain unpromoted. Examples include the difference in tax treatment between employee and family members in employee assistance programmes (EAP), employer arranged financial advice, pension decumulation guidance, the tax treatment of low-cost health cashplans, and even possible confusions about the taxation of any reasonable adjustments recommended by occupational health professionals or the government’s WorkWell scheme.
A simplification of this patchwork of government incentives would doubtless encourage greater numbers of employers to offer wellbeing support and likewise many more employees the chance of utilising what is available. And, as this is largely a recycling of existing reliefs, it should be cost neutral for the government too.
Employers agree!
And employers also support this approach.
A survey by Occupational Health Assessment Limited earlier this year indicated that three in four (74 percent) of businesses would favour one single tax break that supports a wide range of employee wellbeing issues including physical health, mental wellbeing, and financial security.
It really feels like there is an opportunity for government to review the existing tax treatment and tax incentives around those smaller wellbeing and employee benefits cost. Replacing this confusing landscape with one overarching offering that is better understood, minimises any additional employee tax liabilities on these inexpensive benefits, and is easier for employers to correctly report under the new payrolling of benefits in kind system from 2027 represents a smart deal for everyone.
