Benefits in Kind

A Benefit in Kind (BIK) is a notional payment, which increases you employee’s taxable pay without increasing their net pay.  You can also set a BIK payment as subject to NI if required.

As an employee’s taxable pay goes up, their PAYE Liability increases.  This reduces their net pay.  A common use of BIK is to calculate the tax due on a taxable benefit.  You can either produce a P11D after the Payroll year end to report your employee’s taxable benefits or you can register with HMRC to payroll the benefits.

Payrolling the Benefits in Sage 50 Payroll

Before you can process your benefits in Sage 50 Payroll you need to set up new pay elements for any BIKs and select the Benefit in Kind check box.

The benefit in kind payment increases the employee’s pay that’s subject to tax, and if applicable NI.

If you need to process Employer NI only on a benefit, do this through their P11D, Sage 50 Payroll can’t calculate employer only NI.

Setting up a new BIK

1. Click Company then click Pay Element.
2. Click New enter a description, for example, Medical Insurance.
3. Select the checkbox beside Benefits in Kind.
4. If the benefit is subject to NI, select the checkbox beside National Insurance.

Note – If you are not sure if your BIK is subject to NI, please contact us or HMRC for advice.

5. Click OK, then OK

If the BIK is subject to National Insurance, it can increase the loan contribution for employees paying a student loan.  This is due to student loan calculating as a percentage of employees’ NIable pay.

Adding the BIK to an employee’s record

1. Select the relevant employee.
2. Click Employee then click Employee Record.
3. Elick Employment tab, then click Pay Elements.
4. From the Payment Name drop-down list, choose the required payment.
5. Click OK.
6. If required, enter the relevant hours and rate.
7. To add another payment, move to the next line then repeat Steps 4, 5 and 6.
8. Click Save then click Close.

Add the same BIK to multiple employees

1. Select the required employee(s).
2. Click Tasks, then Global Changes.
3. Click Payments, then click Add Payment.
4. Select the required payments.
5. Click OK, click Yes, then click OK.

If you need help setting up a BIK pay element or adding a BIK pay element to an employee’s record or need any other help or advice with your payroll, please contact us

We can also provide a remote access service where we can link into your computer to help you resolve your Sage Accounts or Payroll problems.

Sage 50 Accounts – Chart of Accounts

When you run management accounts in Sage the Chart of Accounts categories your nominal codes.  This allows you to analyse your income, expenditure, assets, liabilities, and capital to assess your business performance.

The Chart of Accounts lists all the nominal codes and assigns them to these categories.  You can have multiple Chart of Accounts, depending on what information you want to show.

Nominal Codes

Sage uses nominal codes to track sales and purchases etc., such as insurance, or sales.  Each code has a unique code, which you can customise to fit your numbering scheme.  When you enter a transaction such as sales invoice or a bank payment you need to assign the relevant nominal code.

Default Layout of Accounts

When you first set up your company in Sage 50 Accounts, your nominal accounts and Chart of Accounts are based on the selected business type.  Business types include sole trader, partnership, limited company, or charity.

What does the Chart of Accounts consist of?

The Chart of Accounts has two sections – Profit and Loss and Balance Sheet

Depending on where a nominal code is included in the default Chart of Accounts decides on how that nominal code is treated when the yearend routine is run.  If a nominal code has been included in the Profit and Loss section, then code is totalled and a reversing entry is entered to bring the balance down to zero.  If the nominal code has been included in a Balance Sheet section, then total of the code is just rolled forward at the year end.

Profit and Loss

The Profit and Loss section is split into various categories, Sales, Purchases, Direct Expenses, Overheads and Taxation.  In each category you can have as many lines as you want splitting or grouping the nominal codes however you want them.  The nominal codes must run together to be grouped and you cannot include one code on another line that is part of a group or your accounts will not balance.

Balance Sheet

The Balance Sheet section again is split into different categories, Fixed Assets, Current Assets, Current Liabilities, Long Term Liabilities and Capital & Reserves.  In each category you can have as many lines as you want splitting or grouping the nominal codes however you want them.  The nominal codes must run together to be grouped and you cannot include one code on another line that is part of a group or your accounts will not balance.  In Current Assets you can have “Floating” Nominal Accounts, these are nominal codes that can be included in Current Assets or Current Liabilities depending on what the balances is e.g. bank accounts whether you are in credit or overdrawn, Sage will show the balance in the correct place i.e. in the Current Assets or Current Liabilities.