Which Benefits in Kind Are Taxable in 2026/27?

What Are Benefits in Kind?

A benefit in kind (BIK) is any non-cash benefit or perk provided by an employer to an employee or director. While your salary is taxed through PAYE in the normal way, non-cash benefits require a separate reporting and collection mechanism — the P11D system.

The taxable value of a BIK is added to your assessable income for the year, and income tax is collected either through an adjustment to your PAYE tax code (reducing your Personal Allowance to collect the tax throughout the year) or through Self Assessment if you complete a return.

Your employer also pays Class 1A National Insurance at 13.8% on the P11D value of most benefits.

Company Car Benefit in Kind

The company car is one of the most significant and widely scrutinised BIKs. The taxable value depends on two factors:

1. The car's P11D value — broadly, the list price including VAT, delivery charges, and any accessories, minus capital contributions you may have made (up to £5,000)
2. The car's CO2 emissions — which determines the applicable percentage

2026/27 Company Car BIK Rates (Selected)

Diesel cars that do not meet the Real Driving Emissions 2 (RDE2) standard attract a 4% surcharge on top of the standard rate, capped at 37%.

Example: A petrol car with a P11D value of £28,000 and CO2 emissions of 110g/km (BIK rate: 27%). BIK value = £28,000 × 27% = £7,560. A 40% taxpayer pays £3,024 per year in tax on this benefit.

Employers must also add the private fuel benefit if they pay for private fuel used in the company car. In 2026/27, the cash equivalent of the private fuel benefit is calculated as £27,800 × the car's BIK percentage — a significant additional charge that makes company fuel a poor deal for many employees.

Private Medical Insurance

Private medical insurance (PMI) provided by an employer is a fully taxable BIK. The taxable value is the cost of the premium paid by the employer for the employee's coverage. There is no de minimis exemption.

If the employer provides PMI covering the employee's family (spouse and children), the entire family premium is taxable on the employee. Employees should receive a copy of their P11D showing the premium amount reported.

Gym Membership

Unlike some other welfare benefits, employer-paid gym memberships are fully taxable as a BIK. There is no de minimis threshold that exempts small-value memberships. If your employer pays £50 per month for your gym membership, HMRC will assess £600 per year as a BIK on your income.

The only exception is an on-site gym that is available to all employees — this is exempt from BIK tax under the "works transport" and welfare facility exemptions.

Mobile Phone

The rules here are precise:

• One mobile phone or SIM provided by an employer for any combination of business and private use: fully exempt. This applies regardless of the level of private use.
• A second mobile phone: the full value is taxable as a BIK. There is no partial exemption.
• A phone the employer buys and then transfers ownership to the employee: taxable at the market value at the point of transfer.

This exemption applies to the phone and the service contract. If the employer provides a phone but pays a separate phone bill that includes personal calls, only the employer-paid personal call costs are technically a BIK — though in practice, this is rarely enforced if the phone itself is primarily for business.

Living Accommodation

Employer-provided living accommodation is one of the more complex BIKs:

• Basic charge: the annual value of the property (broadly, its rateable value or market rental value)
• Additional charge: if the property cost more than £75,000, an extra charge applies based on the excess cost multiplied by the official rate of interest (2% in 2026/27)

Some living accommodation is exempt — notably, where it is necessary for the employee to live there to perform their duties properly (e.g., a caretaker or pub manager who must live on site).

Interest-Free and Low-Interest Loans

If your employer provides a loan (or beneficial loan arrangement) at zero or below-market interest:

• Loans up to £10,000 in total across all outstanding loans: exempt from BIK
• Loans above £10,000: the taxable benefit is the difference between the interest you pay and what you would have paid at HMRC's official rate of interest (currently 2% for 2026/27)

Example: Employer loan of £50,000 at 0% interest. Official rate = 2%. Annual BIK value = £50,000 × 2% = £1,000.

This applies to season ticket loans, emergency loans, relocation loans, and any other beneficial loan arrangement.

Cycle to Work Scheme

The Cycle to Work scheme allows employers to provide bikes and safety equipment as an exempt BIK, subject to HMRC approval:

• The HMRC-approved limit is £1,000 (or up to £2,000 for cargo bikes) per employee per year under the standard simplified scheme
• The employee typically enters a salary sacrifice arrangement over 12 months and then either keeps the bike at a fair market value or returns it
• The exemption applies only to cycles that will be mainly used for commuting or business travel

Equipment above the approved limit, or bikes provided outside an HMRC-approved scheme, are taxable as BIKs in the normal way.

Other Notable BIKs

How Employers Report Benefits: P11D

Employers must report taxable benefits on form P11D for each employee who received them. The key deadlines for the 2025/26 tax year are:

• 6 July 2026: Deadline to submit P11D forms to HMRC and provide copies to employees
• 19 July 2026: Deadline to pay Class 1A NI by cheque (22 July if paying electronically)

Employers must also give each employee a copy of their P11D by 6 July. Employees should check this carefully for accuracy — errors are common, particularly where the employer has incorrect figures for a company car's P11D value, or has included a benefit the employee did not actually receive.

If an employer operates a PAYE Settlement Agreement (PSA), they can pay the tax and NI on certain minor or irregular benefits on behalf of employees, removing the need for a P11D in those cases.

Common P11D Errors to Watch For

1. Private fuel benefit omitted — if an employer pays for any private fuel use, this must be reported separately from the car benefit
2. Incorrect P11D value — particularly for leased cars where the lease price differs from the list price
3. Reimbursed mileage above AMAP rates — the approved mileage rates (45p for first 10,000 miles, 25p thereafter) are the HMRC-approved limits; reimbursements above these rates create a taxable BIK on the excess
4. Benefits provided to family members — if the benefit is provided to an employee's family member (e.g., private medical for a spouse), it is still taxable on the employee

Optional Remuneration Arrangements (OpRA)

OpRA rules, introduced in April 2017, restrict the tax advantage of salary sacrifice arrangements for most BIKs. Under OpRA, the taxable value of a benefit provided through salary sacrifice is the higher of the BIK value calculated under normal rules or the salary foregone.

This effectively removes the tax advantage of salary sacrifice for most BIKs. However, there are exemptions — the following benefits retain their BIK tax advantage even when delivered via salary sacrifice:

• Pension contributions
• Employer-provided pensions advice (up to £500)
• Cycle to Work
• Ultra-low emission vehicles (company cars with CO2 below 75g/km)
• Childcare vouchers and workplace nurseries

Summary

Benefits in kind remain a significant part of many employees' total remuneration packages — and their tax treatment is often more complex than people expect. Company cars remain the largest single source of BIK tax for most employees, though the shift to electric vehicles is reducing this burden for many. Private medical insurance, interest-free loans over £10,000, and gym memberships are all fully taxable with no exemption. If you receive a P11D from your employer, check it carefully before the end of the tax year — corrections to errors can take time to work through the PAYE system.