An employee may get a benefit in kind from their boss instead of cash as a gift. You might also call these “perks” or “fringe benefits.”
There are a few types of benefits in kind that are not tax-free:
- A work car that you can also use for your own needs.
- Clothes (uniforms and safety gear are exempt from taxes, though).
- This is fuel that you can also use for your own car.
- Health protection for individuals.
Basically, anything that isn’t meant to be used on the job is usually a benefit in kind.
On your P11D, you can find your benefits-in-kind.
Why charge something that you get for free?
HMRC wants to make sure that you’re not replacing your pay with perks in kind. This is because it affects how much tax you have to pay.
Every year after making £100,000 to £125,140, you lose the right to your tax-free Personal Allowance. People in this salary range are stuck in a tax trap because they have to pay 60% of their income in taxes.
You could give up cash to escape being taxed at such a high rate. People do this by giving up their pay. This means asking your boss to cover some of your pay with non-cash benefits so that you don’t go over the tax level and into a higher tax rate.
What are some perks in kind that don’t get taxed?
Here is a list of some perks in kind that are not taxed:
- A work phone is one where the boss and the network provider make the deal.
- Staff eats in the kitchen.
- charges made with the company card, but they have to be for business-related costs and not for personal ones.
- Your boss will pay for your training.
- counselling for workers who have been let go.
- There are sports areas inside.
- Gifts (but not cash) for retirement, wedding, moving, etc.
- Contributions to a personal income.
