Sometimes known as 'perks', Benefits in Kind are added extras provided by the employer on top of the employee's standard salary. Examples of Benefits in Kind may be accommodation, use of a car or an interest free loan.
Tax is often payable on the value of Benefits in Kind and so they must be reported annually as part of your employee’s gross earnings. The report must be made via a P11D form and is the Employer’s responsibility.
What counts as a benefit in kind?
If you provide separate accommodation for your employee with separate metering for gas, water and electricity, it is considered a taxable benefit and must be reported as such. However if they live in your home with shared utilities it is not taxable.
If you provide free accommodation for your employee you are not obliged to pay them the full National Minimum Wage. There is something called the Offset Allowance which values accommodation at £52.85 per week so if your employee is live-in and you do not charge them for accommodation you can pay them £52.85 per week less than the minimum wage.
A mobile phone is not considered a taxable benefit.
Use of the employer’s car for work duties is not a taxable benefit. However provision or loan of a car for private use, including getting to and from work, is a Benefit in Kind and must be reported as such. If an employee uses their own car for work the normal remuneration is 45p per mile to cover fuel plus wear and tear. Anything above that rate is a taxable benefit.
Employers must complete a P11D form for Christmas presents or other gifts to employees. Cash gifts or bonuses are added to your employee’s earnings and taxed in the usual way through PAYE.
Private health insurance is considered a taxable benefit.
A private pension is considered a taxable benefit.