Benefit in kind
A benefit in kind is something of value a company gives a director or employee instead of cash — a car, medical insurance, a cheap loan. It is taxed on the individual as income and costs the company employer's National Insurance at 15%.
Also known as: BIK, taxable benefit
How it works
If the company pays for something that is really personal, tax does not disappear simply because no salary was paid. The item is valued under set rules, reported, and taxed on the individual at their marginal rate. The company pays Class 1A National Insurance at 15% on the same value and gets a corporation tax deduction for both the cost and the Class 1A.
Common benefits for owner-managed companies are company cars and fuel, private medical insurance, gym membership, living accommodation, and beneficial loans — a director's loan over £10,000 that carries no interest or interest below HMRC's official rate. Company cars are valued from the list price and CO2 emissions, which is why fully electric cars remain far cheaper to run through a company than petrol equivalents.
Some things are genuinely exempt: employer pension contributions, one mobile phone in the company's name, work equipment provided for business use, eye tests for screen users, annual events costing under £150 a head, and trivial benefits of £50 or less that are not cash and not a reward for work.
Reporting is changing. Payrolling benefits — taxing them in real time through payroll instead of on a P11D after the year end — is becoming the standard route, so check which method applies to your company before the tax year starts rather than after it.
Who this affects
- Directors putting a car through the company without checking the emissions-based charge
- Companies paying private medical cover for the director and family
- Directors with an overdrawn loan above £10,000 paying no interest
- Small employers offering perks that feel informal but are still reportable
Common mistakes
- Paying a personal cost from the company account and treating it as an expense
- Missing the Class 1A National Insurance the company owes on top
- Assuming a benefit is exempt because it is small, when only specific exemptions exist
- Forgetting a beneficial loan charge on an interest-free director's loan
Frequently asked questions
What counts as a benefit in kind?
Anything of personal value provided by the company rather than paid in salary: cars, fuel, medical insurance, accommodation, interest-free loans over £10,000 and similar.
How much does a benefit cost the company?
Class 1A National Insurance at 15% of the taxable value, on top of the cost itself. Both are deductible for corporation tax.
Are trivial benefits taxable?
No, provided each one costs £50 or less, is not cash or a cash voucher, is not a reward for work and is not contractual. Directors of close companies have a £300 annual cap.
Is an electric company car still worth it?
Usually yes. Electric cars carry a much lower appropriate percentage than petrol or diesel models, so the taxable benefit is far smaller for the same list price.
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Reviewed by Waqas Sagar ACA FCCA FMAAT · Last reviewed 13 September 2026 · Figures for 2026/27 · About our practice
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