A benefit in kind is a non-cash reward that an employee may receive from their employer. These can also be known as “perks” or “fringe benefits”. A lot of benefits in kind may be completely tax-free, but there are some exceptions, such as:

• A company car that you can also use for private use;
• Clothing (excluding uniforms or safety gear, which are tax-free);
• Fuel that you can use for your private car use as well;
• Private health insurance.
• Any item that’s not exclusively intended for use on the job is most probably a benefit in kind.

- Why tax a benefit in kind?

The reason why a benefit in kind is taxed is because HMRC wants to ensure that you’re not using benefits in kind to replace your salary. When you earn between £100,000 and £125,000, you gradually lose your entitlement to your tax-free Personal Allowance. Within this salary bracket, you get caught in a tax trap – you end up liable to pay 60% tax on your income. One way to avoid being taxed at such a high rate is to sacrifice cash, which means asking your employer to make up part of your salary in non-cash benefits, therefore avoiding going over the threshold into the higher tax bracket.