🏢 Company Perks · P11D · Tax Codes

Benefits in Kind (BIK) Explained

Understand how company perks like private healthcare and company cars are taxed, and how they affect your take-home pay.

When your employer gives you something of value that isn't cash in your salary, it is known as a Benefit in Kind (BIK) or a fringe benefit.

Because these perks have a financial value, HMRC treats most of them as taxable income. You don't pay National Insurance on them (your employer does), but you do have to pay Income Tax.

Common taxable benefits

  • Company cars: Taxed based on CO2 emissions and list price.
  • Private medical insurance (PMI): Taxed on the cost of the premium your employer pays.
  • Gym memberships: If your employer pays for it directly.
  • Accommodation: Living somewhere rent-free provided by the employer.
  • Loans: Interest-free or cheap loans over £10,000 (like season ticket loans).

How do you pay the tax?

HMRC usually collects the tax on your BIK by adjusting your tax code. They deduct the value of the benefit from your tax-free Personal Allowance.

Example:

Your normal Personal Allowance is £12,570 (Tax code 1257L).

Your employer pays for private medical insurance worth £1,000 a year.

HMRC takes £1,000 off your allowance. Your new allowance is £11,570. Your tax code becomes 1157L. You will pay 20% tax (£200) or 40% tax (£400) on that £1,000 through your monthly payroll.

What are tax-free benefits?

Not every perk is taxed! HMRC allows employers to provide certain benefits completely tax-free:

  • Employer pension contributions
  • Free meals in a staff canteen
  • Cycle to work schemes
  • Work-related training
  • Trivial benefits (small gifts up to £50, not cash, not a reward for performance)
  • Mobile phones (one per employee)

Source: GOV.UK Tax on company benefits

Related tools

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Company Car Tax
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Tax Code Checker
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Take-Home Calculator
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FAQs

What is a Benefit in Kind (BIK)?+
A Benefit in Kind is a perk or fringe benefit you receive from your employer that isn't included in your normal salary. Common examples include company cars, private medical insurance, and gym memberships. Most BIKs are taxable.
How do I pay tax on a Benefit in Kind?+
The value of the benefit is added to your taxable income. HMRC usually collects the tax by adjusting your tax code. They reduce your tax-free Personal Allowance by the value of the benefit, so you pay more tax on your regular salary.
What is a P11D form?+
A P11D is a statutory form that employers must file with HMRC at the end of the tax year. It details the value of all the Benefits in Kind they have provided to you. You should receive a copy of your P11D by early July each year.
Are there any tax-free benefits?+
Yes! Some benefits don't attract tax. Common tax-free benefits include employer pension contributions, cycle to work schemes, free meals in a staff canteen, up to £50 for a 'trivial benefit' (like a birthday gift), and free parking at work.
How is company car tax calculated?+
Company car tax (or BIK rate) is calculated based on the car's CO2 emissions and its list price (P11D value). Electric cars have very low BIK rates (2% for 2026/27), making them highly tax-efficient compared to petrol or diesel cars.