What are benefits in kind?
Benefits in kind, often referred to as BiK, are goods and services offered to employees either for free or at a significantly reduced cost.
Most benefits in kind will be taxable, however, some that are tax free, which we will discuss later on.
What counts as a benefit in kind?
The most common benefits in kind are:
- Company cars
- Medical insurance
- Living accommodation
- Loans
Tax free benefits in kind
These include:
- A mobile phone
- Workplace parking
- Hot drinks/water at work
- Meals in a staff canteen
- Christmas parties (as long as you follow certain rules, such as costing £150 or less per person and it is an event open to all staff members). Take a look at our Can I claim for a Christmas Party? page for more information on this.
You may also choose to help your staff with the cost of childcare, which is another tax free benefit in kind, as long as it is provided by ‘approved childcare’.
This counts as a:
- registered childminder, nanny, play scheme, nursery or club
- childminder or nanny with a registered childminder/childcare agency
- registered school
- home care worker who works for a registered home care agency.
Our Childcare Costs page will tell you everything you need to know about how this works.
Reporting benefits in kind
Any taxable benefits will need to be reported to HMRC either through your payroll or online at the end of the tax year.
You will also need to report how much Class 1A National Insurance you owe on these benefits; if you’re not providing this information via payroll then you’ll need to send a P11D form to HMRC for each employee.
Take a look at our What is a P11D? page for more on this.
What’s the difference between benefits in kind and trivial benefits?
A trivial benefit differs from a BiK due to the size of the gesture.
For example, trivial benefits are small tax-free gifts given to employees.
They do not attract tax or National Insurance contributions and you won’t need to inform HMRC about them as long as you stick to the trivial benefits criteria.
They:
- cannot cost you more than £50
- cannot be cash or a cash voucher
- mustn’t be a reward for their work
- cannot be included in their contract
Examples include:
- Small token gifts, like chocolate or wine
- A birthday present for an employee
- Lunch in the office, like pizza for example
- Evening drinks after work
We hope you found this page helpful. Our team of experts are available to answer any questions you may have, so either contact us via online chat, call us on 01442 795 100 or email jaime.thorpe@dolanaccountancy.com.
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