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
  • Sbuj
    Re: How Will My Second Job Be Taxed?
    Hi I have full time job plus extra part time if I will start working for agency tax for one of my extra jobs will b change…
    16 October 2018
  • Lizzie
    Re: Children's Bonus Bond
    I was bought a £25 Children's Bonus Bond as a christening present in 2001 and was wondering how much it is worth now and when it matures.
    8 October 2018
  • Storm
    Re: What Does Road Tax Pay For?
    I see a fair bit of pothole repairs, the biggest problem I see is the work carried out is very poor indeed more often than not as…
    26 September 2018
  • PETA
    Re: Payment of Pensions
    Can I change my pension to weekly how does this work
    20 September 2018
  • Kaz
    Re: How Will My Second Job Be Taxed?
    Up until june this year i only had 1 job of 14 hrs a wk at minimum.wage, i now have 3 jobs, the 2nd one being 6.7 hrs a wk @…
    19 September 2018
  • Dom
    Re: Claiming Tax Relief on Mileage
    I am paid a £250 per month travel allowance with my salary, and claim monthly travel expenses each month from the company for…
    13 September 2018
  • Fifi
    Re: How Will My Second Job Be Taxed?
    Hi I’m working 22hrs a week at 7.85ph but also signed up to an agency to work as and when, how much tax would I pay
    11 September 2018
  • Littledigidi
    Re: Claiming Tax Relief on Mileage
    Hi - I have a fuel card, the majority of my mileage is work related. can i claim any tax back on this. My company pay for all my…
    10 September 2018
  • TheTaxGuide
    Re: How Will My Second Job Be Taxed?
    B - Your Question:I have two jobs the first is as and when and the second is 12 hrs a week, combined I am nowhere near the…
    4 September 2018
  • Loui
    Re: How Will My Second Job Be Taxed?
    I am employed working 15hrs at £8.20 but get paid monthly and I'm self employed for 2 hrs a week at £8.00 a week. Would I get…
    3 September 2018