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      Benefits In Kind (BIK) in Primo Payroll

      What are 'benefits in kind' and how to process them in Primo Payroll

      What are Benefits in Kind

      Benefits in Kind (BIK) are non-cash perks provided by employers to employees, supplementing their salary. These benefits can include company cars, private medical insurance, gym memberships, and childcare vouchers. While they enhance compensation packages, many of them are subject to taxation and National Insurance contributions.
      Employers must ensure that taxable benefits are reported correctly so that employees pay the appropriate tax through payroll deductions.

      How Payrolling Benefits in Kind Works

      Payrolling BIK allows employers to report and tax benefits in real-time through payroll rather than handling them separately at the end of the tax year. This means tax is deducted from employees’ salaries in the same way as income tax and National Insurance.

      Setting Up Payrolling Benefits in Kind with HMRC

      To process BIK through payroll, businesses must:

      1. Register for HMRC’s payrolling benefits and expenses online service before the start of the tax year (by 5th April).
      2. Select which benefits to payroll – Employers must declare these to HMRC so tax codes can be adjusted accordingly.
      3. Inform employees about:
        • The benefits that will be included in payroll.
        • How their take-home pay will be affected.
        • The cash equivalent value of each taxable benefit.

      Once set up, tax deductions for benefits are made automatically through the Primo Payroll each pay period.

      Setting up 'Benefits In Kind' payments in Primo Payroll

      Settings --> Payments & Deductions --> Payments --> Tick 'Benefit in kind' 

      When a payment is set up as 'Benefit in kind', the program considers it only for Tax & NI purposes. The corresponding tax & NI will be deducted for the payrolled benefits processed. 

      The payslip will show the total of all the payments marked as 'Benefits in kind' and its Year-to-date figures. The current period's Gross For Tax & Gross for NI figures will include the current period's payrolled benefits. And, the payrolled benefits will be reported to HMRC via the FPS.