Company Benefits Tax Guide UK (Car, Health Insurance, Loans 2026)

What Counts as a Taxable Benefit in Kind

A benefit in kind is any non-cash benefit or perk provided to you by your employer that is not covered by a specific exemption. The most common taxable benefits include: company cars and vans including fuel for private use; private health and dental insurance paid by your employer; company loans above £10,000 at an interest rate below the official rate; gym memberships and sports club fees; vouchers and credit tokens (gift cards, store vouchers); childcare vouchers (for new joiners after October 2018, limited to tax-free childcare); accommodation provided by your employer; assets transferred to you (e.g. a laptop or phone you keep); and entertainment and hospitality above the £50 trivial benefit limit. Benefits are valued at their cash equivalent — generally the cost to your employer of providing the benefit. For company cars, the value is calculated using a fixed formula based on the car's list price, CO2 emissions, and fuel type. If you make good (repay your employer for the private use of a benefit), the taxable value is reduced. Salary sacrifice schemes can also affect how benefits are taxed. Exempt benefits include workplace pensions, on-site sports facilities, and mobile phones provided for work use.

Company Car Tax (Based on List Price, CO2, Fuel)

The company car benefit is one of the most valuable and most heavily taxed benefits in kind. The taxable value is calculated using: the car's P11D (list) price (including delivery fees, VAT, and most optional extras); the car's CO2 emissions in g/km; and the fuel type (petrol, diesel, hybrid, or electric). The percentage applied to the list price ranges from 2% for zero-emission electric cars up to 37% for high-emission petrol and diesel cars (2026/27 rates). For example, a petrol car with emissions of 130g/km would have a BiK rate of around 30%. If the list price is £30,000, the taxable benefit is £30,000 × 30% = £9,000 per year. A basic-rate (20%) taxpayer pays £1,800 in tax; a higher-rate (40%) taxpayer pays £3,600. If your employer also provides fuel for private use, there is an additional car fuel benefit calculated using a fixed figure (£27,800 for 2026/27) multiplied by the same BiK percentage. This can add a significant tax charge — often more than the car benefit itself. To minimise tax, choose a low-emission or electric car. You can give up private fuel to avoid the fuel benefit charge. For vans, the flat-rate benefit is typically around £3,600 per year plus £688 for fuel. See Car Tax guide for more on BiK rates and fuel benefit calculations.

Private Health Insurance and Dental

Private medical insurance (PMI) and dental insurance paid for by your employer are taxable benefits in kind. The taxable value is the premium your employer pays to the insurance provider for your cover. If your employer also covers your spouse, partner, or children, the premiums for family members are also taxable and added to your P11D. The insurance premium is reported as a benefit, and you pay income tax on its value at your marginal rate. For example, if your PMI premium is £1,200 per year and you are a higher-rate taxpayer, you pay £480 in additional tax. Some employers offer health cash plans (which pay fixed amounts towards treatments) — these are also taxable. Employer-provided health screening and medical check-ups (one per year) are generally exempt, as is Employee Assistance Programmes (EAPs) that provide counselling. If an employer pays for a health assessment recommended for your job (e.g. for a safety-critical role), that is also exempt. Tax is collected either through your tax code or Self Assessment. You cannot claim tax relief on premiums you pay yourself. If your healthcare benefit is provided through a salary sacrifice arrangement, the benefit value may be different — check your P11D carefully for the correct figure.

Company Loans and Beneficial Loan Arrangements

If your employer lends you money at a low or zero rate of interest, and the outstanding loan exceeds £10,000 at any point in the tax year, you are taxed on the benefit of the cheap loan. The taxable amount is the difference between the interest you actually pay and the interest at HMRC's official rate (set at 2.25% for 2026/27, reviewed quarterly). For example, if you have a £20,000 loan from your employer at 0% interest for the full year, the taxable benefit is £20,000 × 2.25% = £450. If the loan is outstanding for only part of the year, the calculation is adjusted proportionally. If you pay loan interest at a rate below 2.25%, you are taxed only on the difference. Multiple loans from the same employer are aggregated for the £10,000 threshold. Loans below £10,000 are tax-free regardless of the interest rate. Exempt loans include those provided on commercial terms (same rate as a bank would offer) and loans made in the ordinary course of a lender's business (e.g. a bank employee's mortgage). The benefit is reported on your P11D and taxed through your tax code. If you receive a write-off or release of a company loan, the outstanding amount is treated as earnings and taxed through PAYE.

Other Benefits (Gym, Vouchers, Childcare)

Several other common benefits in kind have specific tax rules. Gym memberships and sports club fees — if your employer pays for a gym or sports club membership, the full cost is a taxable benefit. However, an on-site gym provided by the employer for all staff is tax-free. Vouchers and credit tokens — gift cards, store vouchers, and fuel cards for private use are taxable at their face value or cost to the employer. Childcare — employer-provided nursery places and tax-free childcare (up to £2,000 per child per year) are generally exempt, but childcare vouchers for new joiners after 4 October 2018 are not available (you must use tax-free childcare instead). Mobile phones — one mobile phone per employee is tax-free, even for private use. A second phone is taxable. Workplace parking — free or subsidised parking at or near your workplace is not taxable. Relocation expenses — the first £8,000 of qualifying relocation costs are tax-free if you move to start a new job. All other benefits exceeding the £50 trivial benefit limit are taxable. Check your P11D form carefully each year to ensure only benefits you actually received are listed. Errors on your P11D can mean you pay too much tax.

How Benefits Are Reported (P11D) and How You Pay the Tax

Employers must report all taxable benefits on a P11D form for each employee by 6 July after the end of the tax year. You should receive a copy of your P11D from your employer. The total value of your benefits is added to your income for tax purposes. HMRC collects the tax in two ways: through your tax code — HMRC reduces your Personal Allowance in your tax code to collect the tax on your benefits via PAYE throughout the year. This is the most common method. Your coding notice (form P2) shows the adjustment. Through Self Assessment — if you already file a Self Assessment tax return, you enter the benefit values from your P11D on the employment pages. The tax is included in your overall bill, due by 31 January. If you have benefits that change mid-year (e.g. you change your company car or leave your job), your tax code may be adjusted in-year. Employers also pay Class 1A National Insurance at 13.8% on the value of most benefits. If you disagree with a benefit valuation, ask your employer for a breakdown. If they do not correct it, you can dispute the amount with HMRC. See our Tax Codes guide for how benefits affect your code and what to do if HMRC gets it wrong.

FAQs

Are all company benefits taxable?

No. Exempt benefits include workplace pensions, on-site gyms, one mobile phone per employee, workplace parking, trivial benefits under £50, and employer pension contributions. Most other benefits are taxable.

Can I avoid tax on my company car?

Choose a low-emission electric car (2% BiK rate in 2026/27) and avoid private fuel to eliminate the fuel benefit charge. Salary sacrifice arrangements can also reduce your tax but have limits.

What if my employer does not report my benefits on a P11D?

Your employer is legally required to report benefits. If they do not, you must still declare the benefits on your Self Assessment. Failure to report could result in penalties from HMRC.

Can I pay tax on benefits through my payslip instead of Self Assessment?

Yes. HMRC can adjust your tax code to collect the tax through PAYE. This is the default for most employees until the benefit value is too large or your circumstances are complex.

What is "making good" on a company car?

Making good means repaying your employer for the private fuel you used. If you do this by 6 July after the tax year, the fuel benefit charge is reduced. Your employer must confirm the repayment.