Understanding Benefits in Kind (BIK)
Benefits in kind (BIK) are non-cash perks provided by employers to their employees in addition to their regular salary. These perks can range from private health insurance and company cars to gym memberships and parking spaces. Although these benefits offer significant value to employees, they come with certain tax implications that finance directors need to manage effectively.
This blog provides an overview of benefits in kind and the key considerations for finance professionals based on a recent discussion about processing BIK in Pegasus Opera 3 led by Debbie Lane at TMB.
To watch a recording of the discussion or download Debbie’s notes, please click here.
Types of Benefits in Kind
Benefits in kind can include:
Private Health Insurance: Providing employees with private health coverage is a common benefit that can enhance employee satisfaction and well-being.
Company Cars: This is another popular benefit, especially for roles that require extensive travel. However, it is crucial to calculate the cash equivalent value accurately to ensure proper tax reporting.
Gym Memberships: Employer-provided gym memberships support employee health and wellness, promoting a healthier workplace environment.
Other Perks: These can include parking spaces, subscriptions, or even loans. Each type of benefit must be assessed for its respective tax impact.
Essential steps for setting up Benefits in Kind in Opera 3
Setting up benefits in kind involves several important steps:
Registration with HMRC: Before the start of the tax year, it is mandatory to register your intention to offer benefits in kind on the HMRC website. This ensures compliance with tax regulations.
Accurate Reporting: As of 2026, mandatory reporting of benefits in kind through payroll software will be introduced. This change aims to simplify the process and reduce the burden of filling out multiple forms.
Real-time Reporting: Opera 3 Payroll software enables real-time reporting, eliminating the need for certain forms, such as P46.
Monthly Calculation: Benefits in kind will be reported on a monthly basis, which includes calculating the Class 1A National Insurance Contributions (NICs) as part of the Full Payment Submission (FPS). This approach simplifies the annual reporting process.
Practical tips and tools
When managing benefits in kind it is important to consider the following:
Documentation: Maintain detailed records and documentation of all benefits provided to employees.
Reporting Software: Utilize payroll and reporting software such as XRL to streamline the process. Ensure that the software is updated and capable of handling real-time reporting and calculations.
Benefit Calculators: Use available benefit calculators to accurately determine the cash equivalent values and associated tax liabilities.
Stay Informed: Keep up-to-date with any changes in regulations and reporting requirements to ensure ongoing compliance.
Managing benefits in kind is an essential responsibility for payroll professionals. By understanding the types of benefits, following the required steps for compliance, and utilizing practical tools and resources, finance directors can effectively navigate the complexities of benefits in kind.
If you would like more information or help processing your BIK in Opera 3 please email us at pegasus@tmb.co.uk.