subscribe to stafftax
renew stafftax subscription
access-members-area
stafftax tax calculator
“We have been extremely pleased with the service you have given us over the years and consider it to have been excellent value for money.”
Mrs C A – Whitchurch
Home Employers employment costs benefits in kind
Benefits in kind PDF Print E-mail

Benefits in kind are sometimes provided by the employer in addition to the employee's salary. They are often taxable benefits and must be reported annually as part of employee's gross earnings.

Who pays the tax?
Benefits in kind offer a good example of why it is important to agree a gross wage with your employee. In almost all other types of employment the employee is always responsible for paying the tax on benefits. But as many domestic staff have net pay arrangements it means that you, the employer, are responsible for paying this tax, which can potentially be a very expensive experience.

Tax on benefits in kind is payable in arrears and is not reported until July following the end of the tax year. Sometimes it can take up to two years before payments are claimed by HMRC, and during the interim your employee can have moved from one job to another, leaving the new employer responsible for paying what can in some cases be a very large sum of money. If your employee is on a gross wage, however, then the tax is deduced from their gross income at their current rate of tax.

In addition to tax there may also be a Class 1A NI charge of 12.8% of the value of the benefit to be paid - the employer always pays this charge.

Examples of taxable benefits

  • Car
  • Accommodation
  • Health Club Membership
  • Travel
  • Interest Free Loan

NB: PLEASE NOTE THAT THIS LIST IS NOT EXHAUSTIVE.

Mobile phones are not considered a taxable benefit

Use of Car
The use of a car is not considered a taxable benefit if your employee only uses it during working hours. If however your employee is permitted to take the car home and use it as a means to get to and from work, then it must be reported as a benefit in kind.

Accommodation
If accommodation is provided for the employee and it has a separate front door and separate metering for gas, water and electricity, it is considered a taxable benefit and must be reported as such.

Please note that the information and examples contained on this page are to be used as guidelines only. If you have specific questions please contact Stafftax.

 

employment guide

Redundancy pay explained

Domestic employees also qualify for redundancy pay, providing they have been in continuous employment for at least two years.

Read more...

employment law

Introducing our legal service

Your annual subscription to Stafftax entitles you to unlimited use of our Legal Advice help-line. We encourage you to make as much use of this service as you need to manage your domestic employment relations effectively. If you require clarification or advice about any employment issue, other than payroll, then please call or email the Legal Advice helpline.

The Legal Advice helpline is available to you as an employer and is not available to your employee as this may cause a conflict of interest. However, if you wish to make an enquiry to assist your employee, you may call on their behalf.

What we do
Rather than simply explain what you can and cannot do, our legal team work closely with you and focus on finding solutions to your particular situation and problem. We accept and reply to email enquires and will also offer help with drafting letters (should you require it) at no additional charge to you.

Additionally, should you find yourself in a particularly difficult situation and need more help or support over and above that provided by your subscription, we can arrange for you to meet with a member of the legal team in person and for a special member’s rate they can help resolve the matter directly.