Benefit in Kind (BiK)

How Benefits in Kind Are Taxed

A benefit in kind (BIK) is any non-cash perk your employer provides, such as a company car, private health insurance, interest-free loans, or accommodation. These benefits are taxable, meaning their value is added to your income for tax purposes.

The most common BIK is a company car. The taxable value depends on the car’s list price and CO2 emissions. Electric vehicles have a very low BIK rate (2% for 2025/26), making them highly tax-efficient. A £40,000 electric car costs just £800 in taxable benefit, compared to potentially £14,000+ for a high-emission petrol car.

BIK tax is usually collected by adjusting your tax code, so you pay slightly more tax each month. Benefits are reported on a P11D form. Some benefits can be provided through salary sacrifice for better tax efficiency.

How Benefit In Kind Works in Practice

A benefit in kind (BIK) is a non-cash benefit provided by your employer that is subject to income tax and sometimes NI. Common BIKs include company cars, private medical insurance, gym memberships, and interest-free loans above £10,000. The taxable value is reported on a P11D form and collected through your tax code.

Practical Tips

If you receive a company car, the BIK tax depends on the car's list price and CO2 emissions. Electric vehicles have very low BIK rates (2% in 2025/26), making them one of the most tax-efficient BIKs available. A £40,000 electric car costs a basic-rate taxpayer just £800/year in BIK tax, compared to £4,000-£6,000 for a petrol equivalent. Always calculate the true cost of a BIK before accepting or declining one. See P11D explained.

Related Topics

Salary sacrifice arrangements for certain benefits (electric cars, cycle to work) can be more tax-efficient than receiving the benefit as a BIK, because you save both income tax and NI on the sacrificed salary.