Benefit in kind

A benefit in kind is a non-cash reward that an employee may receive from their employer. These are also known as “perks” or “fringe benefits”.

A lot of benefits in kind are completely tax-free, with a few exceptions:

• A company car that you can also use for private use
• Clothing (however, uniforms or safety gear are tax-free)
• Fuel that you can use for your own private car use as well
• Private health insurance

Basically, any item that’s not intended for use on the job (wholly, exclusively and necessarily) is most probably a benefit in kind.

You can find your benefits-in-kind on your P11D.

Why tax a benefit in kind?

HMRC basically wants to ensure that you’re not using benefits in kind to replace your salary. This, of course, is because that impacts your tax liabilities. 

When you earn between £100,000 and £125,140, you gradually lose your entitlement to your tax-free Personal Allowance. Within this salary bracket, you get caught in a tax trap – you end up liable to pay 60% tax on your income. 

One way to avoid being taxed at such a high rate is to sacrifice cash. It’s what’s known as a salary sacrifice. This means asking your employer to make up the part of your salary in non-cash benefits, therefore avoiding going over the threshold into the higher tax bracket. 

What are some tax-free benefits in kind?

Here’s a list of a few tax-free benefits in kind:

• Work phone (where the contract is between the employer and the network provider)
• Staff canteen meals
• Expenses on the company card – although these must be for the business, rather than personal expenses
• Training paid for by your employer
• Counselling for redundant employees
• In-house sports facilities
• Retirement, wedding, leaving etc. gifts (but not cash)
• Personal pension contributions