Tax and workplace benefits.
If you’re employed, you pay tax on what you earn from your job. But that doesn’t just mean your wages or salary.
Some things your employer gives you also count as earnings if they have a value, like a company car or private medical insurance.
These are known as benefits in kind.
In simple terms, it means perks or extras that aren’t cash, but you still have to pay tax on them (unless there are special rules that mean they don’t count).
We’ll walk you through it.
What counts as a benefit in kind?
A benefit in kind is anything your employer provides that:
- Has a value
- Isn’t your normal pay
- Isn’t specifically exempt from tax (e.g. it doesn’t have special rules that mean you don’t have to pay tax on it)
When a benefit is provided, two things matter:
- How much is it worth?
This is the amount the tax is worked out on. - How is the tax collected?
Tax usually happens through your pay or your tax code.
Company cars and vans.
One of the most common benefits is the use of a company car or van, or free fuel for it.
The rules here are complicated. Many people are caught out, so it’s worth understanding the basics.
Company cars.
How much tax you pay on a company car depends on things like:
- the car’s list price
- its carbon dioxide (CO₂) emissions
- the type of fuel it uses
- when it was registered
HMRC uses these details to work out how much extra tax you need to pay.
If your employer also provides free fuel for personal use, this is an extra taxable benefit on top of the car itself.
HMRC have guidance on how company cars and fuel are taxed.
Company vans and fuel.
A company van is only taxed as a benefit if you use it for private journeys, not just travelling between home and work.
If you receive free or subsidised fuel for private use of a van, that counts as a benefit that you have to pay tax on.
HMRC have guidance on how company vans and fuel are taxed.
Other common benefits.
Most other benefits are taxed based on what they cost your employer to provide.
Common examples include:
- Private medical insurance
- Vouchers
- Goods or services made or sold by your employer
HMRC has an A to Z list of benefits in kind. This is aimed at employers, but it has useful information to know if you’re an employee.
How tax on benefits is collected.
From 6 April 2026, tax on benefits will be collected only through the payrolling process.
Your employer adds the value of the benefit to your pay each time you’re paid.
Tax is then worked out on your wages plus the value of the benefit. This means you pay the tax gradually, through your payslip.
If your benefits are payrolled, you won’t receive a P11D form for them.
The P11D process (used in tax years up to 2025/26).
Up to the 2025/26 tax year, employers could report benefits once a year using a form called a P11D. They would send this to HMRC, who would collect the tax you owe through your tax code, or by sending you a tax calculation.
This process ended in April 2026, meaning it can’t now be used.
Changes during the year.
If your benefit changes:
- Check your payslips
- Make sure the benefits included look correct
If something seems wrong, speak to your employer, not HMRC. It’s your employer that is responsible for working out the figures.
Benefits that aren’t taxed.
Some benefits are completely exempt from tax, meaning you don’t have to pay tax on them.
These include things like:
- Employer pension contributions up to certain quite high limits
- Some childcare support
- Free or subsidised meals
- A mobile phone provided mainly for work
- Training and retraining costs
- Staff welfare or counselling services
- Sports facilities
- Annual staff parties within cost limits
For these benefits:
- No tax is due
- They don’t need to be reported to HMRC
If you’re worried something’s wrong.
It’s quite common for people to get a tax bill they’re not expecting, because they haven’t understood how benefits in kind are taxed. So if this has happened to you, you’re not alone.
If you need help after speaking to your employer or HMRC, we may be able to help. Find out more about the free support we provide if you’re struggling with a tax problem.
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Employees.
Get information and advice about getting tax right if you’re an employee.