Many people will have heard of Benefits in Kind. The mechanics for reporting them are changing from 2026.
What Are Benefits in Kind
Benefits in Kind are payments from an employer to an employee over and above their salary. Typical examples are:
- Company Cars and Vans
- Mileage costs reimbursed in excess of HMRC approved rates
- Employer paid charging of private electric cars at employees home
- Beneficial Loans, including “overdrawn” directors accounts
- Settling an employees private expenses, or paying a bill for an employee
- Medical Insurance
- Gifts to employees over £50 a year
- Non business travel, eg holidays and motivational trips
- Accommodation provided to an employee, eg a company funded flat or house
HMRC have a comprehensive list of benefits available on their site
Benefits in Kind apply to:
- Company Directors (as they are regarded as employees of their companies)
- Employees of both companies and unincorporated businesses (Sole traders and partnerships)
They do not apply to Sole Traders and Business Partners in respect of their own taxes (but they do apply to employees of such businesses).
Calculation of Benefits in Kind
Benefits in Kind are normally taxed based on moneys worth, however there are special rules around:
- Cars and Vans – using scale amounts and percentages
- Beneficial loans – using prescribed interest rates
- Accommodation
You’ll need to research each benefit, or take advice.
Tax and NI Effects of BIKs
Benefits in Kind are subject to Income Tax by the employee as if they were additional salary. In most cases they are no subject to NI in the employees hands (exception if they are a cash benefit).
Most BIKs are subject to Class 1A Employers NI, paid by the employer at normal Employer NI rates.
Reporting of BIKs
Historically benefits have been reported via the annual P11D form.
From 2016 employers have been able to voluntarily payroll many benefits – this doesn’t change the tax or NI amounts, but simplifies the reporting as there is no p11D to complete, and tax (employees) and NI (employer) is settled contemporaneously.
From April 2026 payrolling of most benefits is mandatory, although it will still be voluntary for Accommodation and Beneficial Loans