Regulated financial advice is often the missing piece in financial wellbeing strategies – and it matters. When 39% of employees say financial stress affects their performance at work, employers need to ensure staff can access guidance that goes beyond basic education. While financial education, money management tools and access to experts all play an important role, employees often need personalised, regulated advice to make confident decisions about pensions, investments and long-term planning.
Despite this need, many organisations hesitate to offer regulated financial advice because of perceived risk, liability and cost. What’s less widely understood is that employers can provide access to regulated advice safely and cost-effectively, through clear structures that manage liability and through tax-efficient mechanisms such as the EIM21803 exemption.
This article explains how the EIM21803 exemption can make financial advice tax- and NI-efficient for employees, why employers should provide regulated advice, the safest ways to do it, and what liability considerations look like.
Table of contents
What is the EIM21803 exemption?
The EIM21803 exemption, introduced on 6 April 2017 under Section 308C of ITEPA 2003, allows employers to provide up to £500 worth of relevant pensions advice to an employee in a tax year, which is exempt from Income Tax and National Insurance contributions.
Under this exemption, if an employer provides pensions advice to its employees, or pays or reimburses the costs of pensions advice incurred by the employee, the cost of this advice is exempt from Income Tax up to £500 in a tax year provided all conditions are met.
Example:
Normally, if an employer paid for something like this without the exemption, it would be treated as a benefit in kind, and the employee would have to pay income tax on it. With the exemption in place, the employee does not pay tax on this benefit.
Unlike other NI and tax saving schemes, it does not reduce the employee’s other taxable income; it simply means the £500 the employer spent isn’t added to their taxable earnings, so their tax isn’t increased.
What is financial advice?
Financial advice is personalised guidance that helps an individual make informed decisions about their money, tailored to their unique circumstances, goals, and priorities. Unlike general financial education or tools, regulated financial advice takes an employee’s full financial picture into account, including savings, pensions, investments, and other commitments, and provides clear, actionable recommendations.
As part of this advice, regulated advisers can recommend financial products that are suitable for an individual’s situation, helping employees take the right steps to achieve their goals.
Financial advice vs financial coaching
Many reputable financial wellbeing providers will offer financial coaching as part of their service. There are some key differences between these two types of financial experts which employers should keep in mind.
A financial coach empowers individuals to develop healthy money habits and plan for future goals. A suitability qualified financial coach (such as a Maji coach) can explore the personal circumstances of the individual, educate them, coach them and help them create a financial plan, but they can’t make recommendations.
An advisor, in comparison, goes beyond guidance and coaching by providing specific recommendations over actions, products and services tailored to your employees’ individual circumstances.
Both of these financial experts come with their own advantages and limitations that are important to consider. You can read more about it here.
The benefits of financial advice
Giving employees access to financial advice is one of the most impactful ways to support their financial wellbeing. Before considering the benefits or how it fits into your strategy, it’s important to understand the circumstances that might lead employees to need financial advice.
When might employees need a financial adviser:
- Planning for retirement with significant or complex assets
- Seeking recommendations on pension consolidation or investment options
- Reviewing or optimising investment strategies
- Evaluating insurance, income protection, or mortgage protection products
- Estate planning to maximise legacy
How the employee benefits:
- Greater confidence in making complex financial decisions
- Reduced financial stress, leading to improved wellbeing
- Stronger engagement with their pension and other workplace benefits
- Access to regulated expertise, ensuring high-quality recommendations
- Employees get up to £500 worth of advice tax-free every year when using the exemption
How the employer benefits:
- Better utilisation and ROI of your financial wellbeing programme
- Stronger employee retention and engagement
- Opportunity to enhance your employer brand as a supportive, responsible business
- Potential cost-efficiency when paired with salary sacrifice arrangements
Addressing employer liability concerns
While regulated financial advice is a highly valuable part of a financial wellbeing strategy, many employers hesitate to offer it due to perceived risks. We frequently hear concerns like:
- Liability – “What if the advice is poor? Could we be held responsible?”
- Cost – “Can we afford to fund financial advice for everyone?”
- Complexity – “How do we manage the process fairly and compliantly?”
Here’s what you need to know:
- Liability risk is low: If you use regulated advisers and make the service optional, you are not responsible for the advice outcome.
- Cost can be controlled: The £500 exemption is a cap, not a minimum – you choose how much to contribute.
- Implementation is straightforward: The scheme can be offered to all employees or to specific groups and frequently might just mean signposting employees to your chosen financial advisor.
5 tips to offer financial advice to employees safely
By following a few simple best practices, employers can provide meaningful support while keeping liability, cost, and compliance under control. Here are five practical tips:
- Signpost regulated advisory firms only
- Offer advice opt-in: employees decide whether to participate
- Use clear communication templates to reduce perceived liability
- Track participation without intervening in the advice itself
- Work with a provider to help manage the legal aspects like the £500 pound limit and keep records of advice for accounting purposes
How the EIM21803 exemption works
Here’s how the exemption works in practice, so you can offer advice confidently:
- Employers can pay up to £500 per employee per year for advice tax-free.
- If in the case the employer exceeds £500 as part of their financial advice benefit, the first £500 is income tax and national insurance free.
- Payments can cover both regulated financial advice and financial coaching, including discussions on non-pension topics, as long as the advice or coaching includes guidance related to the employee’s pension as part of the overall conversation.
Conditions and eligibility:
To qualify for the income tax and National Insurance exemption, the arrangement must meet either Condition A or Condition B as set out by HMRC:
- Condition A: The scheme is available to all employees generally or to all employees at a specific location.
- Condition B: The scheme is available to employees who have reached the minimum qualifying age under the employer’s registered pension scheme or meet the ill-health condition.
These conditions give employers control over who can access the benefit, allowing them to tailor the offering to their workforce’s needs.
Ensure compliant, high-quality advice for your employees
Partnering with a financial wellbeing provider like Maji can help employers deliver meaningful support to their employees while keeping the risk and HR administration burden low.
- Access to regulated advice – Employees receive guidance from fully regulated financial experts, ensuring recommendations are compliant and high-quality.
- Holistic financial insights – Providers can offer an integrated view of pensions, savings, and other financial products, helping employees understand their overall financial picture.
- Contribution management – Providers can handle the legal and administrative requirements of the HMRC EIM21803 exemption and associated P11D reporting, ensuring contributions remain tax-free and compliant.
Not everyone needs an advisor. But everyone can benefit from a coach.
If you’re looking to maximise the impact of your financial advisory offering in your workforce – consider working with a provider who offers financial coaching as well.
While only around 5–10% of employees typically need regulated financial advice, coaching ensures that all employees can benefit from guidance, support, and accountability. Financial coaching also complements financial advice by preparing employees to act on recommendations effectively and sustainably.
By prioritising coaching as the starting point, employers can be confident that any spend on regulated financial advice is targeted effectively and truly supports the employees who need it most.
In conclusion
The EIM21803 exemption offers a simple, tax-efficient way for employers to provide regulated pensions advice, helping employees make informed financial decisions and plan for retirement with confidence. By combining advice with financial coaching as the starting point, employers can create a comprehensive financial wellbeing strategy that benefits all staff, ensures their investment is well-targeted, and supports long-term financial security.
