🚗 Benefit in Kind (BIK) Explained: What You Need to Know

When your employer provides you with something other than your regular salary – like a company car, private healthcare, or even a gym membership – HMRC sees this as a Benefit in Kind (BIK). And yes… it might mean paying extra tax! 💸

Let’s break it down in simple terms.

✅ What Is a Benefit in Kind?

A Benefit in Kind is a non-cash benefit that has a value. While you’re not receiving money directly, the benefit is still considered part of your income for tax purposes.

Common BIK Examples:

• Company car 🚘
• Private medical insurance 🏥
• Interest-free or low-interest loans 💳
• Accommodation provided by employer 🏡
• Gym memberships or season tickets 💪

💰 How Is BIK Tax Calculated?

The value of the benefit is assessed by HMRC. You then pay tax on that value at your normal income tax rate (e.g. 20%, 40%, 45%).

For example:
If your company car has a BIK value of £5,000 and you’re a 20% taxpayer, you’ll owe £1,000 in tax for the year.

📊 Reporting Benefits

Employers usually report BIKs through form P11D after the end of the tax year. This allows HMRC to adjust your tax code, so the correct amount is collected through PAYE.

Some employers now use payrolling benefits, which spreads the tax across your payslips – fewer surprises!

🚘 A Quick Word on Company Cars

Company cars are one of the most common BIKs – and the most misunderstood!
Tax on company cars depends on:

• List price of the vehicle
• CO2 emissions (low emissions = lower BIK rate)
• Type of fuel (electric vehicles benefit from ultra-low BIK rates ⚡)

💡 Electric cars can have BIK rates as low as 3%, making them super tax-efficient! (from 2025-26 tax year)

🧾 Can You Avoid or Reduce BIK Tax?

You can’t always avoid BIK tax, but you can make smarter choices:

✅ Opt for low or zero-emission vehicles
✅ Ask your employer to offer benefits that don’t trigger tax (e.g. pension contributions)
✅ Review whether the BIK is worth the extra cost – sometimes it’s cheaper to provide your own services

👩‍💼 Final Thought

Benefits in Kind aren’t bad – in fact, they can be a great perk. But understanding the tax implications is key to making the most of them.

Confused about your P11D or company car tax?
Let us simplify it for you.

📞 Call 0333 880 8600
📧 Email Tax@TaxesDoneRight.co.uk
🌍 Visit www.taxesdoneright.co.uk