Benefits in Kind

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dont_use_vistaprint
dont_use_vistaprint Posts: 601 Forumite
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in Cutting tax
If an employer offers private family healthcare in the UK I understand its now treated as a benefit and taxed, but not in mainland Europe.

If this is being offered as part of an overall package, how do you calculate the net effect of the extra tax, what do I need to know and whats the calculation.

Is it based on providing it or just on using it ? If you already have private healthcare covered through a spouses employer could you take it just in case and only pay tax if used ? Or do you pay for having it
"It is not the critic who counts..." - Theodore Roosevelt

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  • BoGoF
    BoGoF Posts: 7,099 Forumite
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    It's based on the provision of it, even if you don't use it you will be taxed. The tax will be due on the 'cash equivalent' of the benefit and will be taxed at your marginal rate of tax.

    Only your employer can tell you what the cash equivalent would be as it's based on the policy premiums.
  • dont_use_vistaprint
    dont_use_vistaprint Posts: 601 Forumite
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    Thanks - what do you mean exactly marginal rate ? I pay higher rate , possibly a small amount of the super higher rate this year
    "It is not the critic who counts..." - Theodore Roosevelt
  • Exodi
    Exodi Posts: 2,889 Forumite
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    dont_use_vistaprint wrote: »
    Thanks - what do you mean exactly marginal rate ? I pay higher rate , possibly a small amount of the super higher rate this year

    I'm presuming he means your tax free allowance would reduce by the additional benefit in kind value and so you'll pay tax on this amount. Marginal rate just means at the tax bracket the amount falls in. If you fall into the 'super higher rate' then you'd expect to pay this on the BIK also assuming your income doesn't change.
    Know what you don't
  • dont_use_vistaprint
    dont_use_vistaprint Posts: 601 Forumite
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    Exodi wrote: »
    I'm presuming he means your tax free allowance would reduce by the additional benefit in kind value and so you'll pay tax on this amount. Marginal rate just means at the tax bracket the amount falls in. If you fall into the 'super higher rate' then you'd expect to pay this on the BIK also assuming your income doesn't change.

    So basically taxed just as salary :
    Benefit worth USD 4,000 = GBP 3,075 X 0.45 Tax = £1,382 extra tax ?
    "It is not the critic who counts..." - Theodore Roosevelt
  • Exodi
    Exodi Posts: 2,889 Forumite
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    dont_use_vistaprint wrote: »
    So basically taxed just as salary :
    Benefit worth USD 4,000 = GBP 3,075 X 0.45 Tax = £1,382 extra tax ?

    Your maths is correct but your wording of 'it's taxed just as salary' is a bit off. As said, usually Benefits in Kind just lower your Tax Free Allowance so you start paying tax on your salary 'earlier'. In essence, yeah, you're paying the additional tax on the benefit in kind.
    Know what you don't
  • unholyangel
    unholyangel Posts: 16,863 Forumite
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    Exodi wrote: »
    Your maths is correct but your wording of 'it's taxed just as salary' is a bit off. As said, usually Benefits in Kind just lower your Tax Free Allowance so you start paying tax on your salary 'earlier'. In essence, yeah, you're paying the additional tax on the benefit in kind.

    I think he means its taxed as if the policy premium was paid to you in your wage. Which is correct imo - hence why its included in adjusted net income.

    I would actually say your wording is a bit off given additional rate payers dont have a tax free allowance and K codes.

    The other option is the employer payrolling the benefit - which will have the same net effect but won't affect your tax code.
    You keep using that word. I do not think it means what you think it means - Inigo Montoya, The Princess Bride
  • Dawsy3761
    Dawsy3761 Posts: 9 Forumite
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    can anyone help me please
    i am taxed for a company car and full fuel expenses
    can these be suspended whilst in Lock down as the last journey i made was on the 16th of March

    Thank you
  • unholyangel
    unholyangel Posts: 16,863 Forumite
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    Dawsy3761 said:
    can anyone help me please
    i am taxed for a company car and full fuel expenses
    can these be suspended whilst in Lock down as the last journey i made was on the 16th of March

    Thank you
    I don't think there is a definitive answer yet (haven't read many updates since last week) but previously they hadn't indicated any change to the rules for BIK.


    You keep using that word. I do not think it means what you think it means - Inigo Montoya, The Princess Bride
  • Dawsy3761
    Dawsy3761 Posts: 9 Forumite
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    Hi,

    yes that is what i think too and getting through to HMRC is even worse at the moment
  • dont_use_vistaprint
    dont_use_vistaprint Posts: 601 Forumite
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    unholyangel said:
    Exodi wrote: »
    Your maths is correct but your wording of 'it's taxed just as salary' is a bit off. As said, usually Benefits in Kind just lower your Tax Free Allowance so you start paying tax on your salary 'earlier'. In essence, yeah, you're paying the additional tax on the benefit in kind.

    I think he means its taxed as if the policy premium was paid to you in your wage. Which is correct imo - hence why its included in adjusted net income.

    I would actually say your wording is a bit off given additional rate payers dont have a tax free allowance and K codes.

    The other option is the employer payrolling the benefit - which will have the same net effect but won't affect your tax code.
    unholyangel said:
    Exodi wrote: »
    Your maths is correct but your wording of 'it's taxed just as salary' is a bit off. As said, usually Benefits in Kind just lower your Tax Free Allowance so you start paying tax on your salary 'earlier'. In essence, yeah, you're paying the additional tax on the benefit in kind.

    I think he means its taxed as if the policy premium was paid to you in your wage. Which is correct imo - hence why its included in adjusted net income.

    I would actually say your wording is a bit off given additional rate payers dont have a tax free allowance and K codes.

    The other option is the employer payrolling the benefit - which will have the same net effect but won't affect your tax code.
    Yes that's what I meant , the resulting calculation of the tax on a US$4000 policy, is the exact same as if I was given US$4000 extra salary. Which makes it easy to calculate. I don't seem to be paying any extra tax, the contract started last July but the admin was behind and the policy didn't start until around October. My tax code looks normal, so I'm assuming come Jan 2021 I will be entering this cash equivalent value on my self assessment and paying the tax then , is this a typical way of handling it ?
    "It is not the critic who counts..." - Theodore Roosevelt
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