Estimated reading time: 3 minutes
Introduction
Providing employees with benefits in addition to salary can help reward and retain staff, but many benefits have tax implications for both employers and employees. HMRC refers to these non-cash rewards as Benefits in Kind (BiKs).
Key Points at a Glance
- Benefits in Kind are non-cash benefits or expenses provided to employees or directors.
- Some benefits are taxable, while others are exempt.
- Employers may need to report taxable benefits to HMRC.
- Employers may pay Class 1A National Insurance on certain benefits.
- Accurate records should be kept throughout the tax year.
What Are Benefits in Kind?
A Benefit in Kind is something of value provided to an employee or director that is not included in their normal salary.
- Company cars.
- Private medical insurance.
- Living accommodation.
- Interest-free or low-interest loans.
- Assets provided for personal use.
Reporting Benefits to HMRC
Many employers report benefits through payrolling benefits. Where benefits are not payrolled, they generally need to be reported to HMRC after the end of the tax year.
Class 1A National Insurance
Employers may be liable to pay Class 1A National Insurance contributions on the taxable value of qualifying benefits.
Keeping Accurate Records Include:
- Benefits provided.
- Employees receiving them.
- Value of each benefit.
- Employee contributions.
- Supporting invoices and documentation.
Common Mistakes to Avoid
- Not reporting taxable benefits.
- Incorrectly valuing benefits.
- Forgetting directors’ benefits.
- Missing reporting deadlines.
- Failing to keep records.
How We Can Help
We can identify taxable benefits, register for payrolling benefits where appropriate, calculate benefit values, prepare HMRC submissions and help keep your payroll compliant.
Further Reading (HMRC)
- Employer reporting expenses and benefits – https://www.gov.uk/employer-reporting-expenses-benefits
- Expenses and Benefits A to Z – https://www.gov.uk/expenses-and-benefits-a-to-z
- Tax on company benefits – https://www.gov.uk/tax-company-benefits
- Class 1A National Insurance rates – https://www.gov.uk/national-insurance-rates-letters/class-1a-national-insurance-rates
- Payrolling employee benefits and expenses – https://www.gov.uk/guidance/payrolling-tax-employees-benefits-and-expenses
Disclaimer
This article is intended as general guidance only and is based on HMRC and GOV.UK guidance available at the time of writing. Tax legislation and HMRC guidance may change, and individual circumstances differ. Please contact us if you require advice specific to your situation.
Last reviewed: July 2026
