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02: The 'cash equivalent'

Directors and employees earning at least £8,500 a year (including benefits) are taxed on the ‘cash equivalent’ of many fringe benefits. The cash equivalent is normally the cost to the employer of providing the benefit, but there are special rules for valuing certain benefits such as company cars.

The cash equivalent is taxed as if it had been added onto your income – typically through your PAYE coding. So if the cash equivalent of a particular perk were £2,000 and you were a higher rate tax payer, the income tax charge would be £800 and the employer would pay class 1A NICs of 13.8%, i.e. £276.

Some benefits are not normally taxable, e.g. contributions within the annual allowance to registered pension schemes and the provision of a single mobile phone (including a smartphone).Last Updated 

Tax rules are subject to change. The FCA does not regulate tax advice.