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Benefits in Kind – All you need to know

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Some employees are often unaware that benefits in kind exist, so we’ve decided to give you a guide on what you need to know on benefits in kind and what there is available to you at your workplace.

 

What are Benefits in Kind?

 

Benefits in kind are benefits that employees receive from their employment but which are not included in their salary or wages. Examples of benefits in kind include company cars, private medical insurance paid for by the employer and cheap or interest free loans.

Some benefits are not taxable. Therefore, they should not be entered on your tax return if you get one. These include:

  • Contributions paid by your employer into an approved occupational or personal pension scheme for you as an employee. Nearly all schemes are included
  • Cheap or free canteen meals, if these are provided for all employees, even if separate facilities are provided for different groups of employees
  • In-house sports facilities
  • Counseling services to redundant employees
  • Certain childcare arrangements
  • Works buses, or subsidies to public bus services, to get employees to and from work

In a case where benefits are taxable, tax is paid on the taxable value of the benefit, which HM Revenue and Customs defines as the cash equivalent value. There are some exceptions to this. There are special rules for calculating the taxable value of the benefit in kind. An example is company cars which have their own special rules.

 

How tax is declared and paid on benefits in kind

 

If you get any taxable benefits in kind and you complete a tax return, you must enter their value on the Employment page of your tax return for the relevant year, even if tax has already been paid on them under PAYE. Your employer also has to make a return to HM Revenue and Customs (HMRC) with details of any benefits in kind given to you. Your employer makes the return on the form P11D, which lists the benefits and expenses for the relevant tax year. You should get a copy this form by 6 July following the end of the tax year.

Benefits in kind may be taxed under PAYE by being offset against personal tax allowances in your PAYE code. You should always check your PAYE Coding Notice and tell HMRC if you do not understand it or if you think you are not paying the right amount of tax. If you are unsure, you should discuss the matter with your accountant.

If the benefits in kind are not included in your tax code for the year when you receive them, the tax on them may be collected after the end of the tax year. If you do not complete a Self Assessment tax return, you may receive a form P800 telling you about an underpayment or overpayment of tax

 

Common Benefits in Kind

 

There are a wide variety of benefits in kind available to employees. Some of the more common ones include:

  • Accommodation – If you’re provided rent free or below market rent accommodation
  • Hotels and temporary accommodation
  • Cars and vans
  • Fuel
  • Childcare expenses
  • Holidays
  • Medical insurance
  • Excessive Mileage allowances
  • Travelling expenses
  • Vouchers

Key Contact: Lynne Auton
Tel: (0845) 308 2288
Email: payroll@payrollsolutions.org.uk
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