HMRC Benefits in Kind

HMRC defines Benefits in Kind as non cash perks which an employer provides to an employee. HMRC sets out strict rules as to which perks need to be reported on using P11d form and P11d(b) form as well as which ones attract additional tax and national insurance charge.

HMRC Benefits in Kind Examples

Here are some example of typical benefits in kind:

  • Company car
  • Company van
  • Mileage & fuel cards
  • Healthcare
  • Parking spaces

Tax and National Insurance on Benefits in Kind

HMRC sets out which benefits in kind attract additional tax and national insurance.  The following is payable on the cash value of a taxable benefit in kind:

  • The employee pays income tax, the amount of which depends on their total earnings;
  • The employer pays Class 1a National Insurance, currently 13.8%.

How to Work Out the Cash Value of a Benefit in Kind

Generally the cash value of a benefit in kind is worked out as the amount paid for the benefit in the tax year.  So for example if an employee is provided with private healthcare which costs the employer £200 a month, then the cash value for the tax year would be £2,400 (12 months x £200).

Non Taxable HMRC Benefits in Kind

Some benefits do not attract additional tax and national insurance and may not even need to be reported on to HMRC. Here are some examples:

  • Salary sacrifice arrangements;
  • A single mobile phone in the name of the business;
  • Bikes for employees;
  • Expenses covered by a exemption agreement (previously known as a dispensation arrangement).
Anita is a Chartered Accountant, turned blogger and creator of the ever popular free Go Self Employed Email Mini Course, which has been completed by hundreds of attendees all over the UK. Using her 10 years experience in accounting, tax and operations for Small Businesses, Anita is on a mission to make finance simple for the self employed, so they can stop stressing about tax & finances and focus on building profitable businesses which will give them the lifestyle they dream of.