Benefits in Kind (BIKs) are non-cash benefits provided by employers to employees, which can include company cars, private healthcare, or interest-free loans. While they may not show up directly in your pay packet, HMRC considers them as taxable income.
Understanding HMRC-approved BIKs in 2025 is vital for managing tax liability and taking full advantage of allowable employee benefits.
1. What Are Benefits in Kind (BIKs)?
A Benefit in Kind is any benefit provided to an employee or director that has a monetary value but is not part of regular salary or wages. These benefits may be taxable unless they fall under specific exemptions.
2. Common HMRC-Approved BIKs in 2025
Here are some BIKs that are commonly used and approved by HMRC:
- Company Cars (taxable, based on emissions and P11D value)
- Private Medical Insurance (taxable)
- Low or Interest-Free Loans (over £10,000 – taxable)
- Living Accommodation (taxable unless job-related)
- Childcare Vouchers (closed to new entrants but still in use for some)
- Mobile Phones (usually one phone per employee is tax-free)
- Cycle to Work Scheme (usually tax-free if conditions met)
3. Tax-Free or Exempt BIKs
HMRC provides exemptions for certain benefits if conditions are met:
- Workplace Parking
- Bicycles and safety equipment (Cycle to Work Scheme)
- Annual parties/events (up to £150 per person per year)
- Employer-provided pension advice (up to £500 per employee)
- Workplace canteens (if available to all employees)
4. Reporting BIKs to HMRC
Employers must:
- Report BIKs on P11D forms by 6 July after the tax year ends
- Pay Class 1A National Insurance Contributions on the value of BIKs by 22 July
Some BIKs can also be included via payrolling, where tax is collected in real time through PAYE.
5. BIKs and Salary Sacrifice Schemes
Some BIKs can be offered through salary sacrifice, where employees give up part of their salary in exchange for a benefit. These arrangements can offer tax and NI savings but must follow specific rules.
Popular salary sacrifice BIKs include:
- Pension contributions
- Electric vehicles
- Cycle to Work schemes
6. Key BIK Planning Tips
- Ensure BIKs are properly valued and documented
- Consider offering tax-efficient BIKs like EVs or pensions
- Review salary sacrifice options for higher earners
- Make use of exemptions to reduce both employee and employer tax
How Eclat Accountancy Can Help
We provide:
- Strategic advice on selecting tax-efficient employee benefits
- Help with BIK reporting and compliance
- Support for setting up salary sacrifice schemes
- Clear guidance on taxable vs exempt benefits
Final Thoughts
Understanding HMRC-approved Benefits in Kind (BIK) in 2025 can improve your employee offering and save money. With proper planning, businesses can offer attractive, tax-efficient perks that boost staff morale and retention.
Contact Eclat Accountancy today for tailored advice on structuring BIKs and salary packages effectively.
