‘Benefits in kind’ are the employment perks that employees or directors receive and that aren’t included in their normal salary.
Some benefits are tax free – things like approved pension contributions, childcare vouchers, canteen meals provided to all employees or benefits that are considered to be ‘trivial’ (under £50 in value and not part of employment reward).
A few points to note
There’s no tax to pay on benefits in kind if an employee earns less than the current personal allowance (£11,000 in 2016/17 and rising to £11,500 by April 2017).
Another point to highlight is the taxable status of parties, such as an office Christmas party. To be exempt from tax, the party must be open to ALL employees and you must spend less than £150 per head – and the combined annual cost of these events must be under £150 per head to be exempt.
How to report taxable benefits
Taxable benefits in kind must be reported on a P11D form which is submitted annually on 6 July, with Class 1A National Insurance paid by both the company at 13.8% by 22 July.
Your employees will subject to PAYE and NI on their benefits in kind at a rate based on their current tax code. The company submits a P11D, which details the benefits for each employee and calculates the P11D tax that will be due.
NOTE: Changes to the taxation of benefits in kind
Changes to the taxation of benefits in kind were announced the the Chancellor in Autumn Statement 2016. Tax savings under the salary sacrifice schemes will be removed from April 2017, with the exception of ultra-low emission cars, pensions, childcare and Cycle to Work.
If you’re concerned about how these changes will affect your business and employees, come and have a chat with us.
Give us a call on 01454 300 999, or drop an email to firstname.lastname@example.org