WFM UK | Payroll UK: BIK Module - Living Accommodation

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Overview

Living Accommodation arises where an employer provides an employee with somewhere to live, or meets the cost of providing accommodation.

Unlike most benefits, Living Accommodation is not eligible for payrolling until the 2027/2028 Tax Year and must continue to be reported via P11D, with Income Tax collected through a tax code adjustment rather than through payroll during the tax year. Employer Class 1A National Insurance contributions apply based on the final taxable value. This article will be updated with Payrolling guidance ahead of the 2027/2028 Tax Year.

Although this benefit follows the same article structure as other benefits for consistency, its treatment differs because the taxable value is often determined after considering factors such as the property’s annual value, whether the cost exceeds statutory thresholds, additional services provided, any rent paid by the employee, and whether job-related accommodation exemptions apply.

For detailed legislative rules and calculation guidance, refer to relevant guidance from HM Revenue & Customs.

There is a single event type for this benefit, reflecting that it is handled administratively rather than triggered by discrete employee events.

This article explains how these events should be applied with BIK module considerations and how to calculate the benefit value. See below for some other articles to assist with preparing and processing benefits in the BIK module:

• For creating this benefit type at company level, go to Configuring Company Benefits
• For applying benefits to employee records, go to Applying Benefits to Employees: Manual & Data Imports
• For how this looks in Payroll when processing, go to How Payrolled Benefits are Reflected in Payroll
• For National Insurance and Best Practices, please read the National Insurance and Income Tax Handling for Payrolled Benefits article

Contents

• BIK Module Configuration and Considerations
• Event Type: Automatically Handled
  • Working out the Taxable Amount

BIK Module Configuration and Considerations

Living Accommodation can still be assigned to an employee within the BIK module where organisations wish to maintain a complete record of benefits provided. This allows employers to capture and track accommodation arrangements for visibility, audit, or internal reporting purposes.

However, because Living Accommodation is not eligible for payrolling, creating or maintaining a record will not generate any payroll interaction, taxable values, or National Insurance calculations within the system. The benefit remains informational only, with reporting and tax treatment continuing to be handled outside payroll via P11D in line with guidance from HM Revenue & Customs.

Employers should therefore treat this configuration as a way to document the benefit rather than to drive payroll processing, until legislative or product changes allow for payroll handling in future.

Event Type: Automatically Handled

Important: Whilst the event type is called Automatically Handled, this is in anticipation of the 2027/2028 Tax Year, and currently nothing is handled in the system in respect to Tax and National Insurance liability.

This event type is used to record that Living Accommodation has been provided to an employee, recognising that the benefit cannot be processed through payroll. No Income Tax or National Insurance is calculated or applied within payroll, and the benefit remains reportable via P11D in line with guidance from HM Revenue & Customs. The record exists for completeness and visibility only.

Working out the Taxable Amount

To calculate the taxable value of Living Accommodation, follow the approach set out by HM Revenue & Customs:

• Determine the basic value of the accommodation
  Identify the higher of:

  • The property’s annual value, or

  • The actual cost to the employer of providing the accommodation (for example, rent paid)

• Adjust for shared or partial business use
  If the accommodation is shared or only partly used for business purposes, apply the relevant proportion to the basic value. This is done in the BIK module by prorating the benefit value

• Adjust for part-year provision
  If the accommodation is provided for only part of the tax year, pro‑rate the value to reflect the period of occupation. This is done in the BIK module by using the Start and End dates appropriately

• Deduct any rent paid by the employee
  Subtract amounts paid by the employee during the tax year. The taxable value cannot be reduced below zero

Important: Apply additional charge for properties over £75,000

• Calculate the cost of the accommodation:

  • Add improvements to the original purchase price

  • Deduct any reimbursements by the employee

  • If you held an interest in the property 6 years before the employee moved in (and first occupation was after March 1983), use the property value at the time the employee moved in rather than the original purchase price

• Deduct £75,000 from the cost

• Multiply the remainder by the official rate of interest

• Apply a proportion if accommodation is only part-year

• Deduct any rent paid by the employee

• Confirm the final cash equivalent
  The resulting figure is the taxable value to be reported via P11D, with Class 1A National Insurance due from the employer

For example:

An employer provides an employee with a company flat for 9 months of the tax year. The property’s annual value is £12,000, and the employee pays £200 per month in rent. The employee uses half of the accommodation for business purposes.

Step 1: Determine the basic value
Use the higher of:

• Annual value: £12,000

• Employer cost (for example, rent paid by employer): assume £0 in this case

Basic value = £12,000

Step 2: Adjust for shared or partial business use
Employee uses 50% for business:
£12,000 x 50% = £6,000

Step 3: Adjust for part-year provision
Accommodation provided for 9 months of the year:
(£6,000 / 12) x 9 = £4,500

Step 4: Deduct rent paid by employee
Employee rent: £200 x 9 = £1,800

Taxable value: £4,500 − £1,800 = £2,700

Step 5: Final cash equivalent
The taxable benefit for the year is £2,700, which must be reported via P11D, with Class 1A National Insurance calculated by the employer.

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