Benefit in kind (BiK) tax calculator
A benefit in kind — private medical insurance, a gym membership, an interest-free loan over £10,000 — is taxed as if its cash value were added to your salary, at your marginal income tax rate. There is no employee National Insurance on it, and HMRC usually collects the tax by shrinking your tax code rather than through a visible payslip deduction.
Tax you pay on this £1,200 benefit
£240.00 a year
£20.00 a month, an effective 20.0% of the benefit's value. Usually collected through a reduced tax code rather than a payslip deduction.
Employee National Insurance on the benefit
£0.00
Most P11D benefits are outside employee NI. That is why £1 of benefit usually beats £1 of salary — but only if you would have bought the thing anyway.
What your employer pays (Class 1A NI)
£180.00
15% of the benefit's value, paid by the employer, not you.
How benefits in kind are taxed
- The value is the cash equivalent your employer reports on a P11D (or through payrolling): what the benefit cost them, for most benefits. Your employer tells you this figure; enter it above.
- You pay income tax only. The value is added to your taxable income and taxed in whatever band it lands in — including the 60%+ zone if it drags your adjusted net income past £100,000. Your employer pays Class 1A National Insurance at 15% on it; you pay no NI at all.
- Company cars have their own rules. A car's cash equivalent is a percentage of its list price set by its CO₂ emissions, not what it cost the employer — use the company car tax calculator for that, or the EV salary sacrifice calculator for an electric car scheme.
- Some benefits are tax-free and should not be entered here: employer pension contributions, one mobile phone, cycle-to-work, workplace parking, and trivial benefits under £50.
How much does a £1,200 benefit actually cost?
The same benefit costs different people different amounts, because it is taxed at the rate that applies to the top of your income. Private medical cover valued at £1,200 on the 2026/27 rates:
| Salary | Tax on the benefit | Per month |
|---|---|---|
| £25,000 | £240.00 | £20.00 |
| £60,000 | £480.00 | £40.00 |
| £110,000 | £720.00 | £60.00 |
The £110,000 row is the one people are caught by: inside the personal allowance taper a benefit is effectively taxed at 60%, so the same cover costs roughly twice what it costs a basic-rate taxpayer. Scottish taxpayers pay their own marginal rate — check it against the Scottish bands.
Why your tax code changed when you joined the medical scheme
HMRC collects BiK tax by cutting your tax-free allowance. A £1,200 medical benefit turns a 1257L code into roughly 1137L: £1,200 less of your pay is tax-free, which claws back the tax on the benefit month by month. If your code looks wrong, the tax code checker shows what each code costs against the standard one.
2026/27 rates, checked 2026-08-28 by Hadi against gov.uk and the employer rates and thresholds. Method on the about page.