Benefits in Kind (BIK) Tax Guide 2025-26
A benefit in kind is any non-cash perk your employer provides that HMRC considers taxable income. From company cars to private health cover, here is how every common employee benefit is taxed in 2025-26.
What is a benefit in kind?
When your employer gives you something of value that is not cash — a car, health insurance, a gym membership — HMRC may class it as a benefit in kind (BIK). The BIK value is added to your gross income, and you pay Income Tax and National Insurance on it, just as you would on additional salary. Some benefits are explicitly exempt; others depend on conditions being met.
Common benefits in kind — 2025-26
Company Car
Taxed on list price × CO2-based BIK percentage. EVs at 3%, diesels up to 37%. One of the most significant BIK costs for employees.
Calculate company car tax →Private Medical Insurance
Employer-paid health cover is taxed on the market value of the cover (employer premium). Group rates make it worthwhile even after tax.
Calculate PMI tax →Fuel for Company Car
If your employer pays for private fuel in a company car, there is a separate fuel benefit charge. The multiplier is £27,800 for 2025-26.
Mobile Phone
One mobile phone per employee is completely tax-free — no BIK applies regardless of the handset value. Additional phones are taxable.
Gym Membership
Employer-provided gym memberships are generally taxable as a BIK unless the gym is on work premises and available to all staff.
Staff Loans (>£10,000)
Interest-free or low-interest employer loans above £10,000 trigger a BIK based on the official interest rate (2.25% in 2025-26) on the outstanding balance.
Cycle to Work
Equipment purchased through a cycle to work scheme is exempt from BIK tax if used primarily for qualifying commuting journeys.
Cycle sacrifice calculator →Childcare (employer-contracted)
Employer-contracted childcare is exempt up to certain limits. The older childcare voucher scheme is grandfathered for existing members. Tax-Free Childcare has replaced new voucher schemes.
Staff Canteen / Meals
Canteen meals provided on work premises and available to all employees are exempt. Meal allowances and restaurant meals are generally taxable.
Accommodation
Employer-provided living accommodation is taxable as a BIK unless it is necessary for your duties (e.g. caretakers, clergy). The BIK is based on the annual value of the property.
Season Ticket Loans
Season ticket loans (typically interest-free) below £10,000 are exempt from BIK. Above £10,000, the loan benefit rules apply using the official HMRC rate.
Trivial Benefits
Small gifts and benefits under £50 per occasion that are not cash or cash vouchers and are not a reward for work can be exempt under the trivial benefits exemption.
BIK tax calculators
Company Car BIK Calculator
Calculate how much Income Tax and National Insurance you pay on your company car based on list price, fuel type, and salary. Covers EV, PHEV, petrol and diesel.
PMI Benefit in Kind Calculator
Calculate the tax cost of employer private health insurance across different PMI values and salaries. See whether your health cover is worth it after tax.
Salary Sacrifice Tax Saving
Salary sacrifice reduces your gross pay, cutting Income Tax and NI. Calculate savings for pension contributions, EV car schemes, and cycle to work.
BIK rates quick reference — 2025-26
| Benefit | BIK basis | Effective cost (basic rate) | Effective cost (higher rate) |
|---|---|---|---|
| EV company car (3% BIK, £30k list) | £900/year | £252/year (£21/mo) | £378/year (£32/mo) |
| Petrol company car (29% BIK, £30k list) | £8,700/year | £2,436/year (£203/mo) | £3,654/year (£305/mo) |
| Private medical insurance (£1,000) | £1,000/year | £280/year (£23/mo) | £420/year (£35/mo) |
| Mobile phone (one per employee) | Exempt | £0 | £0 |
| Cycle to work equipment | Exempt (conditions) | £0 | £0 |
| Interest-free loan (£10,000) | Exempt | £0 | £0 |
| Trivial benefit (under £50) | Exempt (each occasion) | £0 | £0 |
Basic rate: 20% IT + 8% NI = 28%. Higher rate (above £50,270): 40% IT + 2% NI = 42%. Car BIK estimates use England & Wales 2025-26 rates.
Frequently asked questions
What is a benefit in kind (BIK)?
A benefit in kind is any non-cash benefit provided by an employer that has a monetary value. HMRC treats most employee benefits as taxable income — you pay Income Tax and National Insurance on the market value, just as you would on salary. Common examples include company cars, private medical insurance, gym memberships, and employer loans above £10,000.
How is benefit in kind tax collected?
BIK tax is usually collected through your PAYE tax code — HMRC reduces your personal allowance by the BIK value, so additional tax is taken from your monthly salary without a separate bill. Your employer reports BIK values on a P11D at the end of each tax year, or through payrolled benefits in real time.
Which benefits in kind are tax-free?
Tax-free benefits include: one mobile phone per employee, cycle to work equipment (if conditions met), employer pension contributions, on-site canteen meals available to all staff, trivial benefits under £50 per occasion, workplace EV charging, childcare support up to qualifying limits, and interest-free loans below £10,000.
Do I pay National Insurance on benefits in kind?
Yes — you pay employee National Insurance on most taxable BIK values at 8% (or 2% above the Upper Earnings Limit of £50,270). Your employer also pays Class 1A National Insurance at 15.05% on most BIK values, reported annually via the P11D(b) form.
Benefits in kind in 2025-26: the complete picture
Employee benefits are a significant part of total remuneration for millions of UK workers. Whether it is a company car, private health cover, or a staff gym membership, HMRC has clear rules about which benefits are taxable and how to value them. Understanding BIK tax helps you make informed decisions about which benefits to accept and which may cost more than they are worth.
The most valuable tax-free benefits are pension contributions (no limit on what the employer pays, within annual allowance rules), mobile phones (one per employee, any value), and cycle to work equipment. Electric vehicle salary sacrifice is also growing rapidly — combining a low 3% BIK rate with the tax savings of salary sacrifice makes it one of the most tax-efficient benefits available.
For taxable benefits, your marginal rate determines the true cost. A basic rate taxpayer pays 28p in tax per £1 of BIK value; a higher rate taxpayer pays 42p. Choosing lower-emission company cars or opting into salary sacrifice schemes can significantly reduce the tax cost of employee benefits.
Related calculators: