The term “Benefit in Kind” gets thrown around a lot, but do people really know what it means — and more specifically, what it means for the company and the individual? It’s always a buzz when you’re scanning job perks (I’ve been here and its one of the first things we look at) — company car, private healthcare, free lunches — but here’s the catch: some of those benefits come with a tax bill attached, not so free now. . .
A benefit in kind (BIK) is anything you get from your employer that isn’t part of your normal salary, but still holds value. If it saves you money or gives you an advantage (like your boss paying for your Spotify subscription — yes, that counts – would be strange also!), then it probably qualifies. Company cars are the main example for BIKs, but the list is longer than you think; medical insurance, interest-free loans, even fancy work phones used for personal scrolling.
How is it worked out – HMRC gives most BIKs a cash value – this is the “taxable value.” For example, with a company car, it depends on the car’s list price and CO₂ emissions. Whatever the benefit is worth, that value gets added on top of your salary for tax purposes. You don’t actually receive the cash, but you’ll pay income tax on it as if you did. So if your BIK is worth £2,000 and you’re a 20% taxpayer, you’ll fork out £400 in tax over the year — usually taken monthly from your salary through PAYE. Its the same concept of an increase salary – but with an asset.
From an accounting point of view, BIKs are reported through payroll and tax forms like P11Ds, or sometimes handled through PAYE directly. Either way, they show up, and the taxman notices. The company may have to pay Class 1A National Insurance on the value, and the employee gets taxed based on how valuable the benefit is — with some items costing more in tax than they’re worth in real life – not a perk after all, better pay for it yourself !!!
So, what does that mean for you? Enjoy the perks, but know what you’re getting into and remember its not free! Just because something’s shiny and sounds like a bonus doesn’t mean it won’t quietly nibble at your pay packet later.
