Benefits in Kind

Benefits are often attractive form of remuneration to employees, especially if they are paying the higher or additional rates of income tax, because the benefit may either be tax free or subject to less tax

A benefit that is non-taxable is not automatically exempt from national insurance contributions (NICs).

An employer is required to complete form P11D in respect of each employee and for most directors whose earnings are £8,500 or more. Form P9D is required to record taxable benefits received by other employees. Benefits which are treated as pay for NIC purposes must be included on the deductions working sheet column 1A ‘earnings on which employee’s contributions payable’. (This should not include benefits liable to Class 1A NIC). It is utmost important to keep comprehensive records in relation to all benefits and expenses payments.

Company car tax can be a confusing thing to get your head around especially when the cost of providing a company car is steadily increasing. KINGSWAY will help you to retain the most tax efficient benefit and understand its features.

What is company car tax?

If your employer provides you a company car, it is considered a benefit in kind which is subject to tax from Her Majesty’s Revenue & Custom (HMRC).

Company car tax calculator example 

Here’s how to calculate your company car tax in three simple steps;

  • Take your company car’s P11D value (for example £30,000)
  • Multiply this value by the car’s company car tax rate which is dependent on CO2 emissions (for example 20%) to get your BIK amount
  • Multiply this BIK value by your personal tax rate – 20%, 40% or 50% – (for example 40%). This will be the amount of company car tax payable.

£30,000 x 20% = £6,000 (BIK amount) x 40% = £2,400 per year

Mobile phones are currently one of the most popular tax free benefits employers can provide to their employees.

However, many company owners are not meeting the conditions HMRC has put in place to qualify for this tax

free exemption.

Contact KINGSWAY for further information