Home > Tax Credits > Benefits in Kind

Benefits in Kind

By: J.A.J Aaronson - Updated: 28 Nov 2014 | comments*Discuss
 
Benefits Kind Income Tax National

As an employee you will obviously expect to receive a salary commensurate with the work that you do. This is subject to Income Tax above a certain threshold, and you will also be required to pay National Insurance Contributions or NICs, which are put towards benefits like the Basic State Pension. However, you may also be entitled to other benefits that are not part of your salary. These are known as ‘benefits in kind’.

Benefits in kind (also known as perks or fringe benefits) can be varied and wide ranging. Some of the most common of these benefits include a fuel allowance and company car. Contributions to schemes such as private medical insurance also qualify as benefits in kind.

National Insurance

Although benefits in kind are, by definition, not counted as part of an individual employee’s salary, many are still subject to a number of forms of taxation. Primarily, all taxable benefits in kind have Income Tax levied on them by default.

In addition to this, they will be subject to Class 1A National Insurance Contributions (NICs), which are calculated at 13.8% in 2012-13 of total cash value of the benefits. In the vast majority of cases, however, you will not be required to take any action as an employee. Rather, the responsibility for payment of the Class 1A NICs rests with the ‘secondary contributor’, this being the employer.

In most cases, the Pay As You Earn (PAYE) system will apply; this is covered in more detail, along with the basics of income tax and National Insurance, elsewhere on this site (see Top 5 Problems With PAYE Income Tax, and What is Income Tax?).

There are a number of benefits in kind that will be subject to tax under all circumstances. These are certain share option schemes, accommodation, and non-cash vouchers. As you can see, this list is fairly short.

However, some benefits in kind are taxable only if the employee is earning above a certain threshold; this is currently set at £8,500. These benefits are also subject to tax when a company director is the recipient, regardless of the individual’s income. This category of benefits in kind includes:

  • Company cars and vans which are available for personal as well as business use
  • Low interest loans offered by employers totalling over £5,000
  • Gifts from an employer
  • Certain educational scholarships
  • Contributions to private medical insurance schemes

Non-Taxable Benefits

Finally, there are a significant number of benefits in kind that are not normally subject to tax, regardless of the employee’s income. These include:
  • Subsidised meals with the proviso that they must be available to all employees
  • Car parking and specific expenses incurred travelling from home to work
  • Work-related relocation expenses totalling no more than £8,000
  • Uniform, provided that it has the company logo on to be deemed a non-taxable benefit
  • Business gifts totalling no more than £250
  • Specific crèche and nursery schemes
  • Training courses
  • Staff parties
An exhaustive list of these benefits is available on the government’s Directgov website.

If you are an employer, it is important to understand your responsibility regarding benefits in kind. The relevant calculations are carried out on form P11D, which is available from your Tax Office. You should also remember that Class 1A NICs must be paid by 19th July every year.

You might also like...
Share Your Story, Join the Discussion or Seek Advice..
@Cwilts - Here is the HMRC employment income: long service testimonial awards information sheet which should help you as it has various conditions attached which you don't specify in your comment. link here . I hope this helps.
TheTaxGuide - 1-Dec-14 @ 10:53 AM
Hi,I would like to look into awarding staff for long service i.e. 10 yrs.by giving gift vouchers of £100.How does this work.I believe this is a tangible gift and is taxable.Which is fine, but would it come under benefits in kind and would that be through payroll? thanks!
Cwilts - 28-Nov-14 @ 4:54 PM
Share Your Story, Join the Discussion or Seek Advice...
Title:
(never shown)
Firstname:
(never shown)
Surname:
(never shown)
Email:
(never shown)
Nickname:
(shown)
Comment:
Validate:
Enter word:
Latest Comments
  • Cat
    Re: How Will My Second Job Be Taxed?
    Will I still get taxed on my second job if that job's income plus my first one (and any previous one I had that year) amounts…
    13 December 2018
  • LucianoA
    Re: Should I be Paid Mileage Allowance?
    Hi, My employer doesn't pay any mileage allowance, however they offer a company car scheme. My problem is, if I…
    6 December 2018
  • Lou
    Re: How Will My Second Job Be Taxed?
    Hi, I work full time my annual income is 25,000. I am considering taking a second job, how would this effect the amount of…
    14 November 2018
  • Rjrjrj
    Re: How Will My Second Job Be Taxed?
    Hi just need advice on my 2nd job im currently working full time @37 hrs per week min wage and maybe starting 2nd job @16 hrs…
    9 November 2018
  • carol
    Re: What is My Tax Code?
    I have one job permanent but get paid 32 weeks a year. another job in the same place zero hours contract, paid 35 weeks a year I would…
    9 November 2018
  • Ellie
    Re: How Will My Second Job Be Taxed?
    We are currently on working tax credits. My husband earns 8200 and has taken a zero hours job earning roughly 2000 a year .…
    7 November 2018
  • Mikey
    Re: Claiming Tax Relief on Mileage
    I work on building sites as an employee but get no mileage allowance or extra money to cover fuel and travel in my own vehicle.…
    7 November 2018
  • tink
    Re: Can Tax Allowance Be Claimed on Work Clothes?
    Hi I work in a school as a family support worker and travel all over the Wirral supporting them in the…
    6 November 2018
  • Hellc98
    Re: Should I be Paid Mileage Allowance?
    My employer has refused to pay my mileage as they say I have not put my odometer readings on the claim forms. I have…
    5 November 2018
  • Kelly
    Re: What is My Tax Code?
    Hi, I earnt 9k and got taxed 1.1k so far in this tax year as I was on 35k for 3 months. Then I had 3 months of unemployment. And for the rest…
    31 October 2018