Tips

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.