Loyalty points and tax: what limited company directors need to know

There are hundreds of loyalty schemes available to shoppers, from supermarkets to airlines. Many contractors wonder whether they can benefit personally from the points collected when making company purchases.

In this guide, we examine how HMRC views loyalty rewards earned through business spending and whether they can create a tax issue for company directors.

Avoiding a benefit in kind

Normally, if a personal purchase is made through a limited company, HMRC considers it a benefit in kind.

This means the director pays tax on the value, and the company pays Class 1A National Insurance. From April 2025, the Class 1A NIC rate is 15%. The individual pays tax at their marginal income tax rate, which is currently 20%, 40% or 45% in England, Wales and Northern Ireland, with different bands in Scotland.

Loyalty schemes are treated differently in most cases. If you collect points or tokens in your own name, you can usually spend them on personal items without a tax charge.

Conditions that must be met

HMRC sets out some conditions in its Employment Income Manual:

1. The loyalty account must belong to the individual and not the employer. In other words, the Boots card, Nectar account or air miles account must be registered to you, not your company.

HMRC’s own wording (EIM21618) states:

Provided the vouchers, air miles or points belong to the employee rather than the employer, they are not considered as being provided by reason of their employment even if the goods or services giving rise to them happen to be purchased as part of the employee’s business travel or using a credit card provided by the employer.

2. The rewards must not be linked to employment conditions. For example, if a company purchased a pool of air miles and handed them out to staff as part of an incentive scheme, those rewards would count as a benefit in kind.
3. The loyalty programme must be open to the public. If anyone booking the same flight or buying the same goods would earn the same points, the scheme is valid. If the benefit is only available because of your employment status, it becomes taxable.

Why HMRC takes this view

The reasoning is straightforward. There is no additional cost to the company in generating points on a standard retail or airline card.

The expense belongs to the business, but the incidental rewards are treated as personal.

Provided the three tests above are satisfied, you can use the points for private spending without triggering a tax liability.

Examples in practice

This means directors can keep and use air miles collected on business flights, supermarket or fuel card points earned on company purchases, or coffee shop vouchers collected on travel days.

None of these should create a benefit in kind as long as the account is personal, the scheme is open to the public, and the employer does not provide the points as part of an incentive.

Grey areas

If a company provides a corporate credit card in a director’s name and points are collected on that account, HMRC could argue they are employment-related.

Likewise, if the company converts points into cash or vouchers and then passes them to the director, that would be a taxable benefit. The rewards must remain personal and outside the company’s accounting records.

Keep records carefully

HMRC expects directors to keep loyalty rewards separate from their company accounts.

They should not be recorded in business bookkeeping.

Good practice is to maintain a personal loyalty account and keep the points entirely separate from business finances.

This makes it clear that the company did not provide the benefit and avoids confusion in the event of an enquiry.

Final thoughts

If you plan to make significant use of loyalty rewards built up through business spending, check with your accountant.

They can confirm that your arrangements stay within HMRC’s rules and that your company is not exposed to an unexpected benefit in kind charge.