If you’ve spotted Benefits in Kind (or BiKs for short) on your tax return and you’re now wondering what it means, we’re here to help you understand the basics.
BiKs are a form of added benefit your employer has given to you and if this appears on your tax return, it means that at least some of the benefits you’re receiving are taxable. It’s important to understand what the information on your payslip means so you can make sure you’re paying the right amount and type of tax.
What is a Benefit in Kind?
Benefits in Kind are essentially extra perks that employers can give their employees in addition to their pay. These are either free of cost to the employee or something that is significantly discounted for them.
To qualify as a benefit for tax purposes, these are things which benefit the employee personally rather than goods or services which relate to the work they do.
You might also see them being referred to as ‘fringe benefits’ or ‘P11D benefits’ because this is the name of the form employers use to report BiKs to HMRC (although the reporting rules are changing – more on that later).
BiKs aren’t a legal obligation, and employers can choose whether or not they want to give staff these types of benefits.
Common reasons why an employer might choose to give an employee Benefits in Kind include:
- Attraction and retention of staff: Employing top talent and encouraging them to stay loyal to the business
- Supporting an employee in their role: If somebody has to travel a lot for their job, for example, a company car or personal fuel allowance could be given as a BiK
- Employer reputation: Building up a good reputation as an employer will also help attract and retain talent and help a business stand out in the job market
Other examples of benefits in kind include:
- Private healthcare
- Work-from-home allowance
- Childcare/childcare vouchers
- Work phone
- Living accommodation
- Non-business-related travel expenses
- Non-business-related entertainment expenses
- Cycle-to-work support
- Bonuses
- Interest-free loans
- Share options
Gifts employers give to their employees can also qualify as a benefit in kind if they’re worth more than £50 each, and total more than £300 in a tax year.
Do I need to include Benefits in Kind on my tax return?
The tricky thing about BiKs is that yes, they need to be reported on your tax return if you need to submit one. This is because some BiKs are taxed in order to prevent them from replacing pay or salary. Although they aren’t actually money, HMRC still considers them to have financial value, which means they are liable for Income Tax and National Insurance (NI).
The amount of tax you will pay is based on the taxable value of the benefit. This taxable value is added to your overall taxable income so you can then pay the necessary tax and NI, which is why BiKs appear on your return.
P11D and P11D(b) forms
Employers must inform HMRC of any BiKs their employees receive, either by completing a P11D form, or through payroll software. They must also submit a P11D(b) form at the end of each tax year to let HMRC know how much Class 1A National Insurance needs to be paid.
Normally, your personal BiKs information is then pre-filled onto your tax return for you via the correct tax code. However, it is super important to double-check that it’s correct. If you spot any mistakes, you can let HMRC know so you don’t end up paying too much or too little in tax or NI.
Making sure your benefits are reported correctly is also needed to make sure you’re on the right tax code for all other tax purposes.
Payrolling for Benefits in Kind
From April 2026, payrolling of benefits will become mandatory for most types of BiK although it is still voluntary for employers up until that point.
Payrolling of Benefits in Kind is where BiKs are reported by employers in real-time through whichever payroll system they use. This means that the employee then pays tax and NI at source from their gross taxable income.
The payrolling process is designed to simplify and digitise the reporting of BiKs and payment of tax and NI on them. Currently, the use of P11D forms and changing BiK recipients’ tax codes is time-consuming and causes an unnecessary lag between when BiKs were received and when tax and NI are subsequently paid on them.
How an accountant can help
Understanding benefits and taxes can be complicated, especially when you’re busy doing what you do best. That’s why, if you can afford it, we recommend enlisting the help of a qualified accountant to complete your tax return for you.
Once you have provided everything your accountant needs to complete your Self Assessment, they can then make sure all the necessary details are recorded and reported accurately and within the Self Assessment deadline.
They’re also experts in their field and it’s an accountant’s job to stay ahead of the latest changes and updates to tax rules, regulations and processes. This means they can help you better understand things like payrolling benefits and how they apply to you.
If you need more help, we have lots of tips and advice to get you started. Need an accountant? Learn more about hiring one today.
