Benefits in kind can be thought of as perks enjoyed personally, using company funds. Due to the fact that these perks effectively increase your personal income and are not taxed as part of a regular salary, each of these expenses may incur National Insurance Contributions at 13.8%
These types of benefits are reported each year to HMRC via a P11D form which simply highlights certain expenses, either paid by the company back to the employee or expenses enjoyed by the employee, during the tax year.
National Insurance Contributions owed should be paid to HMRC by the company, not an individual employee.
Common benefits include:
- A company car
- Private health insurance
- Personal tax return fees paid for by the company
- Interest free loans from the company to an employee - think an overdrawn Director's Loan Account (DLA)
- Private travel
An example company example of a Benefit in Kind and how it is taxed is when a company Director, pays for their Self Assessment tax return using their company funds - as it's a personal filing, the Director is essentially using company funds for personal benefit. This is not the Personal Tax itself.
E.G - Company Director purchases Self Assessment for £90, the NICs owed would be taxed @ 13.8% which is £12.42 which would only be paid via the P11D(b)
The following are more examples of taxable benefits and expenses which you should tell us about:
- Assets paid for by the company and transferred to you at no cost or below market value e.g. Personal items paid for using company cheques or credit cards and money not refunded to company;
- Payments made on your behalf e.g. paying personal bills from company account or with a company credit card;
- Vouchers (in the case of child care vouchers any excess over £55) or credit cards e.g. using company credit cards to fund personal expenditure;
- Living accommodation – the cash value of the living accommodation is regarded as a benefit;
- Mileage Allowance – amounts in excess of the HMRC approved rates;
- Cars, vans and/or fuel provided by the company and available for private use (in the case of vans incidental private use can be ignored);
- Low or interest free loans, often referred to as director’s loans;
- Private medical or dental insurance paid for from the company account;
- Assets placed at your disposal, eg motorcycles, holiday homes;
- Professional fees, subscriptions - some subscriptions to professional bodies may be exempt;
- Training – only work related training is allowable and only if paid for or reimbursed by the company;
- Telephones, mobile phones and Blackberrys unless the contracts are in the company’s name.
You are no longer required to report the following expenses on the form:
- Business travel
- Phone bills
- Business entertainment expenses
- Uniform and tools for work
To qualify for an exemption, your company must be reimbursing your actual expenses costs incurred.