In addition to your salary, if you are receiving any other benefits as part of your job, you may receive benefits in kind (BIK). Some BIK perks are tax-free, and some incur tax. In this blog, you will come to know about what BIK is, it is taxable, what tax you need to pay on your company car, and how to report a BIK.
So, Let’s start!
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What is Benefit in kind?
The fringe benefits or perks given by employers but excluded from employees’ salary are known as BIK. These benefits in kind perks can include child care vouchers, private medical insurance, and company cars.
There are some BIK perks, such as in-house sports facilities, free meals, work-related training, certain cost of travel (work bus service), and work and safety clothes that are tax-free. But, you need to pay tax for the other perks.
BIK simply means that if any vehicle is provided to you by your employer, then you will pay tax on it. The significant amount of this tax will depend on the vehicle you choose or receive.
Are BIK perks Taxable?
Yes, BIk perks are taxable. HM Revenue & Customs defines the amount of BIK tax that you must pay. It is determined by certain rules or can either be the money equivalent of the goods or services. For example, the utilisation of a company car is one of the most common taxable BIK perks.
There are certain ways to reduce BIK tax if you think it is too high. You have the option to change the vehicle so you can choose it to reduce your tax bill. If you choose a more modern or less expensive vehicle with lower carbon dioxide emissions, your tax can be reduced.
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What tax do I need to Pay on my Company Car?
If you are allowed to use the car owned by a business or employer (company car), and if you can use it for both private and business purposes, you have to pay tax on the value of the benefit.
The benefit to you depends on the following:
- Car list price and any attachments
- Car registration date and the type of fuel it uses
- Carbon dioxide emissions of the car
How to report a BIK?
To report a BIK, you need a P11D form. There may be NICs to be paid on them as these perks increase your salary. Remember that the company will pay for these NICs instead of an individual. All P11D forms must be submitted to HMRC by the 6th of July following the end of the relevant tax year. If any taxable benefit is provided to you by your employer, it must be included on your P11D.
We hope with the highlighted details; you will understand better about BIK. So, we will conclude our blog by saying that the rules limiting the benefits in kind are complicated. Each example of taxable BIK perks must be examined individually whether any tax is due by the employee or the employer. Therefore, it requires a professional advice.
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Disclaimer: This blog contains general information about BIK.