The taxman has designs on the perks of your job

‘Benefits in kind’ can take many forms, but overall are any non-salary aspect of a staff member’s employment package. Ian Tongue shows some of the more common areas where a tax charge can arise.

A benefit in kind is HM Revenue and Customs’ (HMRC’s) way of taxing a perk of the job. 

The PAYE system ensures you pay the right amount of income tax on your salary, so a separate system is in place to value the benefit of anything else you may be entitled to as part of your salary package. 

These benefits are reported annually by the employer on form P11d and HMRC has a system to value the benefit based on its nature.

For an employee, the value of these benefits is subject to income tax at their marginal rate of tax, added onto earnings.

As an employer, in addition to the cost of paying for these additional benefits, the value of benefits calculated is subject to National Insurance contributions which is paid by the company.

Types of benefit 

In relation to doctors’ NHS employment, there are usually few benefits in kind. The most common are:

 Cars provided under the NHS Fleet Scheme (salary sacrifice);

 Excess mileage allowances;

 Paid-for parking at hospital.

But if you are trading as a limited company for your private practice, you have more options and these can be a useful way of incentivising or protecting a key employee, which includes the directors. 

The most common benefits are:

 Cars;  

 Health insurance;

 Life assurance;

 Loans.