When we talk about employee perks, most people think of company cars, private healthcare, or maybe a gym membership. These are all examples of Benefits in Kind (BIKs), non-cash rewards that employees or directors receive from their employer on top of their usual salary.
In simple terms, if something an employee gets from work that gives them a personal benefit, even if it’s partly used for business, it might count as a Benefit in Kind, and that could mean it’s taxable.
But here’s where it gets a bit more complex.
To stop businesses from skirting around salary tax by offering “free perks” instead of pay, the government steps in. Taxable BIKs are subject to:
- Income tax, paid by the employee
- Class 1A National Insurance, paid by the employer
Not all perks are taxed the same way — and some are exempt altogether. For example, company cars come with their own detailed calculations based on CO₂ emissions, fuel type, and list price. Meanwhile, other benefits like staff parties or certain low-value gifts might fall under tax-free thresholds.
With so many rules and exceptions, it’s no wonder businesses get confused about what’s taxable, what’s not, and how to report it all correctly.
Common benefits in kinds include:
- Company Car available for employee’s personal use
- Private Health Insurance
- Home Phones with personal use
- Fuel for company car
- Accommodation paid by business
- Interest free loans over £10,000 (including Director loans)
- Pecuniary liabilities (personal costs settled by the company)
Luckily, there are a tax-exempt benefits including:
- Pensions that are to an approved personal pension scheme
- Staff annual events that are not over £150 per person per year (must be available to all staff)
- Childcare services that are in house at the place of work
- In-house leisure facilities at the workplace
- Meals – Free canteen meals or vouchers
- Payments towards employee’s household costs up to £4 a week without evidence
- Travelling costs for work
Tax Relief for Employers
The cost of providing BIKs can be claimed as a deductible business expense, reducing your company’s taxable profits, and therefore the corporation tax you owe at year-end.
It’s a win-win: reward your team while lowering your tax bill.
Reporting Benefits in Kind (BIKs): What You Need to Know
BIKs are most commonly reported on a P11D form, which adds the value of the benefit to an employee’s taxable income. This means their total earnings for tax purposes go up, and depending on their tax band, so does the amount of income tax they’ll pay.
Employers also have a responsibility here, they must file a P11D(b) form to declare how much Class 1A Employer’s National Insurance is due on all the benefits provided during the tax year.
A Smarter Way to Report: Payrolling Benefits
Instead of waiting until year-end, employers can choose to ‘payroll’ BIKs, meaning the value of benefits is included in the employee’s taxable income in real time, through monthly payroll.
If all BIKs are payrolled, there’s no need to submit individual P11D forms for those items. However, the P11D(b) is still required to account for National Insurance.
Upcoming Changes to BIK Reporting – From April 2026
From April 2027, it will become mandatory to report all BIKs through payroll, meaning the P11D form will be phased out entirely for most benefits. This change aims to simplify the reporting process for employers and provide greater transparency and timeliness for employees, as the tax will be collected in real time.
Key points to note:
- All benefits in kind will need to be payrolled, this removes the option of reporting some through payroll and others via P11D.
- Employers will still be required to file a P11D(b) to account for the Class 1A National Insurance due.
- It’s essential for employers to review their systems and processes now to ensure they’re ready to fully transition to payrolling by the start of the 2026/27 tax year.
Key Deadlines and Filing Responsibilities
As the employer, you are responsible for declaring any BIKs provided. This is done by submitting the P11D form to HMRC by 6th July, following the end of the tax year on 5th April.
📌 For example, BIKs provided in the 2024/25 tax year must be reported by 6th July 2025.
Once submitted, you’ll also need to give a copy of the P11D to each affected employee by the same date.
Need help with the paperwork or unsure what to include? That’s where we come in. We manage the entire process for our clients, from preparation to submission.
What Employees Need to Know
Employees are taxed on the value of their BIKs. HMRC typically collects this tax by adjusting the employee’s tax code in the current year to recover the amount owed from the previous one.
Once an employee receives their P11D, they should:
- ✅ Check the listed benefits and amounts are accurate
- ✅ Understand how and why their tax code will change
We’re always happy to explain the process to your team and support them with understanding their payslips and tax codes.
We’re here to help!
At SAS, we’re already supporting our clients through this transition:
- Helping you review and adjust payroll systems in advance
- Ensuring all relevant BIKs are correctly and compliantly payrolled
- Taking care of your P11D(b) submissions
- Providing proactive advice so you’re always ahead of the curve
We’ll make sure you’re fully prepared and stress-free when these changes take effect. If you’re unsure what this means for your business, get in touch now and we’ll guide you through it.
Let us handle the details, so you can focus on running your business. Get in touch with a member of #TeamSAS for more advice or guidance
