11 Purdeys Way, Rochford, England, SS4 1ND
11 Purdeys Way, Rochford, England, SS4 1ND
A benefit in kind (BIK) is a form of remuneration provided to employees by employers, which is not in the form of cash but takes the form of goods or services. BIK represents an important part of an employee’s remuneration package and is subject to certain tax rules and regulations.
This article will discuss what constitutes a BIK, how it is taxed, and how employers might use it as part of their reward strategy.
BIKs are usually provided by employers as noncash benefits such as company cars, private medical insurance or gym membership. These are considered taxable income and must be reported to the relevant tax authorities. The amount that employers need to report depends on the value of the goods or services they provide, which can be determined using several methods including market value or cost-plus pricing.
Employers should also consider any applicable exemptions when calculating their liability for BIKs.
Employee benefits are a form of compensation offered to employees in addition to their salary or wages. Benefits can include non-cash items such as vacation time, health insurance, and other forms of compensation. Depending on the benefit, they may be subject to taxation and must be reported on the employee’s P11D.
Benefits in kind (BIK) are taxable benefits that an employee receives from their employer that are not included in their salary or wages. Relevant life insurance is a type of BIK which provides tax efficient life cover for an individual employed by a company and is often used as an alternative to traditional group life assurance schemes.
The tax treatment of relevant life insurance varies depending on whether it is provided under a trust arrangement or within a payroll scheme. However, corporation tax relief can be claimed for the premiums paid by the employer regardless of how it is set up. The cost of providing relevant life insurance policies is treated as a taxable benefit in kind for both employees and directors who receive them.
It should also be noted that any lump sum death benefit payment is exempt from inheritance tax.
Group life insurance is a form of life insurance that is provided to an entire group of people, usually employees within a company. It can provide financial security and protection in the event of death or disablement due to illness or accident.
Generally, the employer pays all or part of the premium for this type of insurance and it is treated as a benefit in kind. As such, the premiums paid by the employer are subject to tax and must be reported on a P11D form. The employee will then need to include this amount on their tax return.
Depending on the type of policy, any benefits received may also be taxable. It is important for employers and employees alike to understand how group life insurance policies are taxed so they can plan accordingly.
Group income protection, however, is usually not subject to a tax charge, and so it does not need to be reported on a P11D form. This type of policy pays out if an employee is unable to work due to illness or injury and can offer financial security when they are unable to generate an income from employment. It also covers additional costs such as medical expenses which may be incurred as a result of being off work for an extended period of time. An employer can choose to pay for the cost of the policy for their employee in addition to their salary, which would then be classed as a benefit in kind. However, this benefit will only be taxable if it has a cash equivalent value of over £500 per annum.
Information regards to taxation levels and the basis of reliefs are dependent on current legislation. Individual circumstances are not guaranteed and may be subject to change. The Financial Conduct Authority do not regulate trusts.
MyKeyManInsurance.com is a trading style of My Key Finance Limited for website purposes only.
My Key Finance Limited is Authorised and Regulated by the Financial Conduct Authority. Our FCA number is 628996. View on the FCA Register .
Registered in England and Wales No. 08954576.
My Key Finance Ltd
The information on this website is provided for general guidance only and does not constitute financial, tax or legal advice. The suitability and tax treatment of any cover will depend on your individual circumstances and may change in the future.
If you are unhappy with our service, we operate a formal complaints procedure. Details are available upon request.
If you are not satisfied with the outcome, you may be able to refer your complaint to the Financial Ombudsman Service (FOS) at
Copyright 2025 mykeymaninsurance. All rights reserved.
