The short answer
A benefit in kind is a non-cash perk the company gives you, such as a car, private medical cover or an interest-free loan. It is taxed as income on you, and the company pays Class 1A National Insurance at 15%, reported on a P11D by 6 July after the tax year. Some perks, such as trivial benefits and certain equipment, are exempt.
Checked 26 October 2026. Rates for 2026/27.Key facts
| Fact | Detail |
|---|---|
| P11D deadline | 6 July after the tax year |
| Class 1A NI | 15% paid by the company |
| Payment of Class 1A | By 22 July (19 July if by post) |
| Trivial benefits | Up to £50, subject to a £300 annual cap for directors of close companies |
| Employee pays | Income tax at their marginal rate |
What a benefit in kind is
A benefit in kind, often shortened to BIK, is a reward the company gives you that is not paid as cash through payroll. Examples include a company car, private medical insurance, an interest-free or cheap loan, accommodation and private use of company assets. Because you gain something of value, HMRC treats it as part of your earnings.
You pay income tax on the taxable value of the benefit, and the company pays Class 1A National Insurance on it. The value is usually set by a formula, not by what the company actually spent, which is why a seemingly modest perk can attract a large tax charge.
The P11D and Class 1A reporting
The company reports benefits on form P11D and sends a summary, form P11D(b), to HMRC. The deadline is 6 July following the end of the tax year, so benefits provided in 2026/27 must be reported by 6 July 2027. You pay the Class 1A National Insurance by 22 July, or 19 July if paying by cheque.
You also receive a copy of the P11D, and the tax on the benefits is either collected through your tax code or declared on your Self Assessment return. A company that has no benefits to report must not send a form, though it should tell HMRC that none are due.
Company cars and fuel
A company car is the most common benefit. The taxable amount is the car’s list price multiplied by a percentage based on CO2 emissions, so petrol and diesel cars can produce a large benefit. Fully electric cars carry a very low percentage, which has made them attractive. If the company also pays for fuel for private use, a separate fuel benefit charge is added.
If the car is not available for private use, there is no benefit. For a sole director, proving that is difficult, because HMRC expects a pool car not to be kept at home.
Loans and living accommodation
A loan to a director that is interest-free or low interest is taxable if the balance exceeds £10,000 at any point in the tax year. The benefit is calculated using HMRC’s official rate of interest, and the company pays Class 1A NI on it. A director’s loan account that is overdrawn above £10,000 therefore creates both a possible section 455 tax charge and a benefit in kind.
Accommodation provided by the company, such as a flat for the director, can also be a taxable benefit. Exemptions exist where the accommodation is needed to do the job, but they are narrow.
Benefits that are tax-free
Not every perk is taxable. HMRC allows a number of exemptions.
Trivial benefits costing £50 or less, if not cash and not a reward for work. Directors of close companies are capped at £300 a year.
One mobile phone contract per employee.
Workplace charging for electric vehicles.
Annual staff parties costing up to £150 per head.
Eye tests and glasses for display screen use, where required.
Bicycles and safety equipment under the cycle to work scheme.
Employer pension contributions.
Check the conditions carefully, because the exemptions only apply if the rules are followed.
Payrolling benefits
Instead of reporting benefits on a P11D after the year, an employer can choose to payroll them. The taxable value is then added to your pay each month through the payroll, and tax is collected through PAYE. From April 2026, HMRC is making this the default way to report most benefits, so employers will need to register to payroll benefits. If your company has benefits to report, discuss with your payroll provider how to meet the new requirement.
A worked example of a company car benefit
Suppose your company provides you with a petrol company car with a list price of £30,000 and a benefit-in-kind percentage of 28%. The taxable benefit is £8,400 a year. If you are a higher rate taxpayer, the tax at 40% is £3,360, and the company pays Class 1A National Insurance of 15% of £8,400, which is £1,260. The total tax cost of the benefit is £4,620, which is a lot for a car whose private use may be modest.
If the car were a fully electric model with a low percentage, such as 3% to 5%, the taxable benefit on a similar price might be about £1,200, with tax of £480 and Class 1A NI of £180. The difference shows why the type of car matters so much, and why many directors now choose electric.
Other common taxable perks to watch
Several other perks can create a taxable benefit without much notice. Private medical insurance and dental cover are taxable. Gym membership paid for by the company is taxable unless it is on-site and available to all staff. Personal use of a company laptop is generally fine, but a gift of a laptop at the end of its life is taxable on the market value. Payment of a director’s personal bills, such as a council tax bill, is taxable as earnings.
If the company pays personal costs by mistake, correct it quickly, either by repaying the company or treating it as a loan or dividend, so it does not become an unreported benefit.
How to keep benefits under control
Review the benefits your company provides at least once a year, ideally before the tax year ends, to decide whether each is worth the tax cost. Ask whether the perk could instead be provided as an exempt benefit, for example by replacing a taxable gift with a trivial benefit within the £50 limit. Make sure everything provided is recorded, so that the P11D is accurate and filed by 6 July. An accountant can model the true cost of each perk, including income tax, Class 1A National Insurance and the Corporation Tax saving, before you agree it.
The bottom line
A benefit in kind is a non-cash perk the company gives you, such as a car, private medical cover or an interest-free loan. If you would rather not do it alone, our fixed fees start at £45.83 + VAT a month.
Frequently asked questions
What is a P11D?
It is a form the company sends to HMRC each year to report benefits in kind provided to directors and employees. It is due by 6 July after the end of the tax year.
Do I pay tax on a company laptop?
No, if the laptop is provided for business use and any private use is insignificant. A laptop that is mostly for personal use may be a taxable benefit.
Is private medical insurance a taxable benefit?
Yes. The cost to the company is the taxable benefit, you pay income tax on it, and the company pays Class 1A National Insurance, though the cost is deductible.
What is Class 1A National Insurance?
It is a tax paid only by employers, at 15% for 2026/27, on most benefits in kind provided to employees and directors. It is not deducted from your pay.
Can a director receive trivial benefits?
Yes, up to £50 per benefit, but directors and their family members of close companies have an annual limit of £300.
Does a company pay tax on benefits in kind?
The company pays Class 1A National Insurance at 15% on the value of most benefits, but it also gets a Corporation Tax deduction for the cost of providing them.
When is a benefit in kind exempt?
Exemptions include trivial benefits up to £50, one mobile phone per employee, workplace EV charging, a staff party up to £150 per head and pension contributions.
What happens if I do not file a P11D?
HMRC can charge a penalty of £100 per 50 employees for each month the form is late, and it can also charge interest and penalties on unpaid tax and National Insurance.
This article is general information, not personal tax or financial advice. Rules and rates change, so check GOV.UK or speak to an accountant about your circumstances. Rates shown are for 2026/27, last checked November 2026.