9. May 2026

Understanding Company Benefits in Kind: Cars and Health Insurance

For many UK businesses, employee perks can help attract and retain talented staff. However, certain benefits are taxable and are known as “Benefits in Kind” (BIKs).

A Benefit in Kind is a non-cash benefit provided in addition to salary. Common examples include company cars and private medical insurance.

Company Cars

Company cars remain a popular employee benefit. The tax payable depends on the car’s list price, CO₂ emissions, and fuel type. Electric vehicles usually attract lower BIK rates, making them more tax efficient for employers and employees.

Employees pay Income Tax on the benefit, while employers may also pay Class 1A National Insurance. Regular reviews of vehicle choices can help reduce tax costs.

Private Health Insurance

Private medical insurance can support employee wellbeing and reduce absence, but HMRC treats employer-funded cover as a taxable benefit. The value of the premium is normally added to the employee’s taxable income.

Benefits in Kind must usually be reported through P11D forms unless they are payrolled.