Benefits in Kind are ‘perks’ or added benefits provided by the employer above and beyond the employee's salary. They are often taxable and must be reported annually to HMRC as part of employee's total earnings.
Who pays the tax?
Benefits in kind offer a good example of why it is important for employers to agree a gross salary with their employees. If a net salary is agreed, then the employer is liable for the tax. If a gross salary is agreed, then it comes out of the employee’s salary. In addition to tax there may also be a Class 1A National Insurance charge of 13.8% of the value of the benefit to be paid - the employer always pays this charge.
Examples of taxable benefits*
- A car or use of a car for the employee’s own purposes
- Employee accommodation, if it has a separate front door and separate utilities from the employer’s
- Medical insurance
- An interest free loan
Examples of benefits that are tax-free*
- Use of a car for work purposes
- Use of a mobile phone (for work and / or private purposes)
- Personal gifts other than cash that are given for reasons unrelated to the job – ie a wedding or retirement gift
- Bicycles and cycling safety equipment provided for employees to get to and from work
*PLEASE NOTE THESE LISTS ARE NOT EXHAUSTIVE.