Understanding Benefits in Kind (BIK): Essential Guidance for Directors and Businesses

15 Jan 2025

Published in: Member News

Learn how to calculate and report Benefits in Kind (BIK), including company cars and fuel benefits, to ensure tax compliance

What is a Benefit in Kind (BIK)?

A BIK is any non-cash benefit provided by the company to its employees or directors, such as a company car, private health insurance, or fuel for personal use. These benefits are subject to tax and must be reported correctly.

Example for a Director (Company Car & Fuel Benefit): Company Car BIK: If your company provides you with a £30,000 company car with 100g/km CO2 emissions, the taxable BIK is calculated as: The BIK rate for a car emitting 100g/km CO2 in the 2024/25 tax year is 22%. Taxable BIK for the car = 22% of £30,000 = £6,600. This amount is added to your income and taxed at your usual income tax rate. Fuel Benefit Charge (If Fuel is Provided for Personal Use):

If your company provides fuel for personal use, the taxable BIK for fuel is based on the fuel scale charge. The fuel scale charge for 2024/25 is £26,100. Fuel BIK = 22% of £26,100 = £5,742. This amount is also added to your income and taxed at your usual income tax rate.

Class 1A National Insurance Contributions (NICs): The company must pay Class 1A NICs on the total BIK value (both the company car and fuel benefits). Total BIK for NICs = £6,600 (car) + £5,742 (fuel) = £12,342. Class 1A NICs = 14.53% of £12,342 = £1,793.72.

How to Report: Self-Assessment: As a director, you must report both the car BIK (£6,600) and fuel BIK (£5,742) on your Self-Assessment tax return.

P11D Form: The company must submit the P11D form to HMRC by July 6th, detailing the total value of these benefits.

Key Takeaways: Submit the P11D form by July 6th. Report BIKs (car and fuel) on your Self-Assessment tax return. Your company must pay Class 1A NICs on the total BIK value (both car and fuel benefits).

Stay on top of these changes to ensure tax compliance and efficiency. As always, consult with your accountant for tailored advice.

Contact us at:

Email-Shahzad.younas@aims.co.uk

Telephone-01902 927093

Submitted by Shahzad from AIMS Accountants
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