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
  • Yorkie
    Re: How Will My Second Job Be Taxed?
    Hi, I'm in full time employment and in my employers service dept. I earn a decent wage, on the edge if being a higher rate…
    9 April 2019
  • White
    Re: Claiming Tax Relief on Mileage
    Hello there im looking for advice on my current role i have been told i need the fill out a self assessment tax return due to my…
    6 April 2019
  • sim
    Re: Claiming Tax Relief on Mileage
    hi I get payed 45p per mile of my employer for business miles but universal credits say that it's income and reduce my monthly…
    29 March 2019
  • Panco
    Re: How Will My Second Job Be Taxed?
    I work 60 hours per week is £459 in week,but I looking for a job on weekends it’s will be 8 hours £68per booths days how much…
    28 March 2019
  • cdoggywoof
    Re: Are DVLA Car Tax Rates Fair?
    For someone who can only afford a car for £1000 and the VED will cost them £200 each year, which is 20% of the vehicle cost, this…
    21 March 2019
  • Whitely
    Re: How Will My Second Job Be Taxed?
    Hi, I am earning approx £9,000pa working in one job. I have been offered a second job where I will earn £3,400pa so it takes…
    19 March 2019
  • Leroy
    Re: How Will My Second Job Be Taxed?
    If i work 16.2.5 hours a week then in a second job do 10 hours a week how much tax will a pay
    13 March 2019
  • Fire
    Re: How Will My Second Job Be Taxed?
    Hi I work part time 22.5 hrs week and earn £17,500 year. I have just been offered extra work of 3 - 6 hours a month earning…
    13 February 2019
  • shelle
    Re: How Will My Second Job Be Taxed?
    i currently work 10 hors in supermarket been offered a job at care home 30 hours a week how / what will happen to tax how…
    23 January 2019
  • Wild child
    Re: How Will My Second Job Be Taxed?
    Hi I have a full time job and get 16,500 a year but thinking of getting a second job that I get 5,280 a month how much tax…
    21 January 2019