Starting a new business? Get 40% off our accountancy services for 3 months! 😀

x

Offering benefits in kind, or BiKs as they call them in the biz, can be a way for businesses to provide additional perks to employees and directors. These so-called fringe benefits have tax implications though, so it’s important to understand how they affect the way you report income and pay tax. We’ll start with the basics.

What are benefits in kind?

Benefits in kind are non-cash benefits which employees and directors receive, that aren’t part of their wages. You might sometimes also hear them called P11D benefits, perks, or fringe benefits.

Although these benefits don’t take the form of cash, they still have a financial value and as such, are subject to income tax and National Insurance.

Benefits in kind can cover all sorts, from a company car to private healthcare, or gym membership. Just to make things confusing though, not all company benefits are subject to tax. For instance, childcare, or a company van which is only used for work.

Are business expenses a benefit in kind?

Payments which are to reimburse expenses don’t count as a benefit in kind, as long as they’re not for personal use. For example, if an employee or director goes to an off-site client meeting and the company reimburses their parking costs, this doesn’t count as a benefit in kind.

Sticking with the travel theme, giving an employee an interest free loan to buy a travel season ticket should go down as a benefit in kind. This is because it’s a payment from the business, for the direct benefit of the employee.

 

Complete managed payroll service

From just £4 per payslip

Learn more

Why do I need to pay tax on benefits in kind?

Receiving benefits in kind effectively increases the value of what you receive from the business as an employee or a director. Because they have a cash value, and benefit you personally rather than the business, HMRC need to know about them.

How do I report benefits in kind with a P11D?

It’s important to keep detailed records of all the perks that employees and directors receive from the company. These should show the date, and include information about the benefit’s value.

You’ll need to use this information to tell HMRC about the benefits that each employee receives. Submit this information to HMRC using a P11D form at the end of the tax year.

You can submit P11D forms either:

If you already deduct and pay tax on employee benefits through your payroll (similar to deductions you make for staff wages) you won’t need to submit a P11D for them.

The business must also submit a P11D(b) form to tell HMRC how much Class 1A National Insurance it needs to pay. This is because employers make National Insurance Contributions (NICs) on the value of benefits they give to employees, including company directors.

You’ll still need to submit a P11D(b) even if you deduct and pay tax on benefits through your payroll.

Do I need to give employees a copy of their P11D?

It’s good practice to give employees a copy of the information you provide to HMRC about benefits in kind. If they’re self-employed on the side (which you might not know about!) or a company director, they’ll need that information for their Self Assessment tax return. They can also ask HMRC for a copy of the information which you submit.

If you have questions about providing expenses to your staff, or our online accounting services, we can help! Call 020 3355 4047, use the live chat button on your screen, or get an instant quote online.

About The Author

Elizabeth Hughes

A content writer specialising in business, finance, software, and beyond. I'm a wordsmith with a penchant for puns and making complex subjects accessible. Learn more about Elizabeth.

More posts by this author
guest
0 Comments
Inline Feedbacks
View all comments

Read more posts...

Architects and Tax

Architecture is a highly diverse sector when it comes to tax. It’s partly down to the type of businesses that carry out…

Read More

June 2022 Client of the Month: Manea Kella

This month we spoke to Adrian Manea, architect and director at Manea Kella, a London based RIBA Chartered architecture and interior design…

Read More

Succession Planning for Business Owners: What Comes Next?

When you own a business, it’s extremely normal to feel like you’re surviving one day to the next – ‘winging it’, as…

Read More
Back to Blog...

Confirm Transactions

The number of monthly transactions you have entered based on your turnover seem high. A transaction is one bookkeeping entry such as a sale, purchase, payment or receipt. Are you sure this is correct?

Yes, submit my quote
No, let me change it

Please contact our sales team if you’re unsure

VAT Returns

It is unlikely you will need this service, unless you are voluntarily registered for VAT.

Are you sure this is correct?

Yes, the business is VAT registered
No, let me change it

Call us on 020 3355 4047 if you’re not sure.

Bookkeeping

You only need this service if you want us to complete the bookkeeping on your behalf.

Would you prefer to complete your own bookkeeping?

Yes
No

Call us on 020 3355 4047 if you’re not sure.