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Benefits in kind - What are benefits in kind?

Benefits in kind are taxable items that are purchased or provided in addition to a salary

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As part of a salary package, an employer may provide benefits in kind. Any benefits received that have a monetary value will need to be declared to HMRC as they might be subject to taxation depending on earnings.

As a self-employed individual, benefits in kind may be purchased for business purposes and must be declared on a tax return.

Types of benefits in kind

Benefits in kind (BIK) cover a range of different items, including: private healthcare, accommodation, a company car, a gym membership, an interest-free loan, travel expenses, or otherwise.

What are Benefits in Kind? They can include a company car, gym membership, healthcare, and more.

Reporting to HMRC

Normally, an employer would inform HMRC and the employee of the BIK at the end of the tax year by producing a P11D form, which will be used to adjust the tax code.

If you are self employed or the employer, then it is your responsibility to maintain the records for your employees for any benefits in kind you may wish to provide over and above their wages/salary.

As an employee, your employer may have a dispensation in place which will cover any expenses, however, this has to be applied directly from HMRC.

Tax on Benefits in Kind

For taxable BIK, the total value must be declared on the tax return for the year they were acquired. Although some BIK may have already been taxed under PAYE, it’s still important to include them in a return.

The current Personal Allowance is £12,500, so anyone with an income under this amount is considered a ‘lower-paid employee’ and will not face tax on benefits in kind.

Tax-free BIK

Yes, some types of BIK are not subject to tax. These include but are not limited to:

  • Payments to a pension
  • In-office facilities
  • Meals provided by the company
  • Up to £8,000 in relocation expenses
  • Personal gifts not connected to the job (not including cash)

Debitoor and tax

By staying on top of your business finances with a cloud-based invoicing and accounting software such as Debitoor, your tax experience could be much smoother for both you and your accountant.