A benefit in kind is anything of value your employer provides besides money: company cars, private medical insurance, gym memberships, interest-free loans over £10,000. HMRC puts a cash equivalent on each benefit and taxes it as if it were salary; employers also pay 15% Class 1A NI on it.
Company cars are the classic example, taxed on a percentage of list price driven by CO2 emissions, and that percentage is tiny for electric cars, hence the boom in EV company car schemes. Benefits currently reach your tax bill via the P11D and a code adjustment, moving to real-time payroll from April 2027. Cost yours with the Company Car Tax Calculator.
A £40,000 electric company car has a 4% appropriate percentage in 2026/27, a £1,600 cash equivalent costing a higher-rate taxpayer £640 a year. A £40,000 petrol car at around 30% carries a £12,000 equivalent and a £4,800 bill. The gap is deliberate policy and the main reason salary-sacrifice EV schemes exploded.
