Understanding Benefits in Kind in Payroll

Benefits in kind (BIK) refer to perks or employee benefits that employees or directors receive from their company, separate from their salary or wages. While some are untaxed, others are subject to taxation, complicating matters for both employers and employees. Companies are also liable for National Insurance Contributions on these benefits, further adding to the complexity.

However, this article aims to identify what constitutes a benefit in kind and determine its applicability. Find out more below.

What are benefits in kind?

As an employee, it’s important to be aware of the non-cash benefits or services provided by your employer for personal use, which hold a monetary value. These benefits are known as a Benefit in Kind (BIK) and include employee benefits that are not solely for business purposes.

BIKs are taxable as they act as a supplement to cash salary. This ensures that salary substitution with other benefits is prevented, and HMRC can obtain its due share.

BIKs can also include a wide range of benefits, such as company cars, private healthcare, gym membership and more. These benefits are considered as part of your overall income and may need to be reported for taxation purposes.

By understanding BIKs, you can better manage your income and ensure you meet your tax obligations. Keep in mind that these benefits contribute to your overall income and can significantly impact your tax liability. So, make sure to report them accurately and on time to avoid any potential penalties.

Mandatory requirement being enforced in 2026 for employers to payroll benefits.

HMRC has announced that from 06 April 2026, it will become mandatory for employers to payroll benefits in kind provided for their employees. As of May 2024, payroll agents can support clients with the registration process in preparation for this change.

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To reduce your company’s administrative burden and ensure that your business is compliant with payrolling benefits, please get in touch with our payroll experts.