If you’re an overseas-based HR, payroll, or Global Mobility professional responsible for employees in the UK, you may come across the term “benefits in kind.” This is the UK equivalent of what’s known in the US as fringe benefits or non-cash compensation—perks provided to employees that are not part of their regular paycheck, such as company cars, health insurance, or housing.
While similar in nature, the way these benefits are valued, taxed, and reported is different in the UK. This page outlines how UK benefits in kind work, how they’re reported to HMRC (the UK tax authority), and what overseas employers need to know.
In the UK, benefits in kind are non-cash items or services provided by an employer to an employee. These are taxable, just like wages or salaries, but are generally reported outside of payroll unless the employer has opted into payrolling benefits (a new UK system that will become mandatory from April 2027).
Employees are taxed on the cash equivalent of the benefit, which is calculated according to specific UK rules (not market value).
A company car might result in a higher tax charge in the UK than in the US due to UK-specific valuation rules based on CO₂ emissions and fuel type.
HMRC (Her Majesty’s Revenue and Customs) uses this information to adjust the employee’s PAYE tax code so that the correct amount of tax is collected throughout the year.
Unless the benefits are payrolled, they must be reported annually using a P11D form—the UK’s version of a fringe benefit reporting form—for each employee. There is also a P11D(b) form submitted by the employer to report the total value of benefits and calculate the Class 1A National Insurance Contributions (NICs) due (like an employer payroll tax).
Employees do not receive these benefits as cash, but they will still pay income tax on them. Typically, HMRC adjusts the employee’s PAYE tax code after the P11D is submitted. This adjustment increases the tax deducted through payroll.
Employees should be made aware that the UK method of valuation might result in a higher taxable benefit than in their home country, especially for items like vehicles.
Starting April 2027, most benefits-in-kind must be taxed in real-time through payroll. This means employers will have to calculate the value monthly, apply the appropriate tax and NIC, and report it through payroll software.
To find out more about payrolling of Benefits: Payrolling Benefits in the UK – Coming 2027
We specialise in helping overseas HR and payroll teams manage UK reporting obligations. Our services include:
If your business is sending employees to the UK or has a UK workforce, we’re here to guide you through the complexities of the UK tax system.
A Benefit-in-Kind is a non-cash benefit provided to an employee or director, such as a company car or private health insurance. These benefits are not part of the salary but are still taxable.
Yes. All taxable benefits provided to employees working in the UK must be reported to HMRC, even if the benefit is provided by an overseas group company.
The taxable value is calculated using UK-specific rules. This value is reported on a form called P11D. Employees pay income tax on this value, and employers pay Class 1A National Insurance (currently 15%).
A P11D is a UK tax form used to report taxable benefits and expenses provided to employees and directors. It must be submitted to HMRC each year by 6 July, covering the period ending 5 April.
The P11D(b) form is used by the employer to declare the total amount of Class 1A National Insurance Contributions (NICs) due on all employee benefits. It is submitted alongside the individual P11D forms.
Yes. Even if a benefit is provided by a parent or sister company outside the UK, it still needs to be reported if the recipient is a UK-based employee.
Currently, most benefits are reported separately using the P11D form. However, from April 2027, many benefits will need to be processed through payroll in real-time under a new “payrolling benefits” regime.
HMRC provides specific rules and guidance for calculating each type of benefit. For example, company cars are taxed based on list price, CO₂ emissions, and fuel type. We can help you determine the correct valuation.
These are employer-only contributions, calculated as a percentage (currently 15%) of the taxable value of Benefits-in-Kind. They are due to HMRC by 19 July each year.
HMRC can impose penalties and interest for late submissions or under-reporting. It’s important to get it right and report on time.
Senior Associate
Global Mobility, Personal Tax & VAT
Senior Manager
Head of Direct Taxes
