Non-cash earnings ― overview

By Tolley

The following Employment Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Non-cash earnings ― overview
  • Types of non-cash earnings with a different treatment
  • Tax
  • National Insurance
  • Non-cash earnings and PAYE
  • Non-cash earnings and the National Minimum Wage

In addition to wages and salaries, many reward packages include other items such as the provision of a car, health insurance or childcare. The employer may also choose to pay certain bills on behalf of the employee, eg in respect of a home landline or utility bills. These are often referred to as benefits-in-kind, BIKs or simply ‘benefits’.

Types of non-cash earnings with a different treatment

As with any other kind of employment reward, if the non-cash earnings are provided through a third party rather than the employer, it is worth considering whether the ‘Disguised remuneration’ provisions in ITEPA 2003, ss 554A–554Z21 (Part 7A) apply, as those rules have priority over most of the other rules for taxing employment income. See the Disguised remuneration ― overview guidance note. If there is no third party, or one of the exemptions from ITEPA 2003, ss 554A–554Z21 (Part 7A) applies, then the normal rules as described below, apply.

One form of non-cash reward that employers can offer to employees is shares or share options. The tax treatment of shares and share options is covered in the guidance notes on share schemes (see the Comparison of share schemes guidance note as a starting point).

Employers may also make contributions to pension schemes on behalf of their employees. The guidance notes on pension schemes set out the employment tax position for that element of a pay package. See the Pension scheme types guidance note as a starting point.

This note focuses on other forms of non-cash earnings, often referred to as benefits-in-kind.


The charge to tax on employment income specifically includes not only cash payments but also ‘any gratuity or other profit or incidental benefit of any kind obtained by the employee if it is money or money’s worth, or anything else that constitutes an emolument of the employment’.

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