When an employer provides living accommodation to an employee, the accommodation is generally a taxable benefit in kind. There are two components: the basic charge (based on annual value) and an additional charge that applies when the property cost exceeds £75,000. This calculator covers both charges and the job-related accommodation exemptions.
The rules are found in Part 3 Chapter 5 of ITEPA 2003. The basic charge uses the annual value (rateable value or market equivalent). The additional charge uses the official rate of interest — 2.25% for 2025/26 — applied to the value above £75,000.
Key Rules for 2025/26
- Basic charge: annual value of accommodation (rateable value or equivalent)
- Additional charge threshold: £75,000 (employer's cost)
- Additional charge rate: HMRC official rate 2.25% on excess above £75,000
- 6-year rule: if property owned >6 years, use market value at date first provided
- Employer Class 1A NIC: 13.8% on net benefit
- Job-related exemptions: customary, necessary, or security threat
Accommodation BIK Calculator
Enter the details of the accommodation provided. For job-related accommodation (see guidance below), the benefit may be wholly exempt.
The 6-year rule: if the property was first provided more than 6 complete tax years before 2025/26 (i.e. first provided before 6 April 2019), market value at date first provided is used for the additional charge where it exceeds the original cost. Enter market value above to apply this rule.
The Basic Charge: Annual Value
The basic benefit charge for living accommodation is the annual value. This is defined as the gross annual value — in practice, the property's rateable value under the old rating system or an equivalent market rental value where no rateable value exists. For England and Wales, properties no longer have live rateable values for domestic rating purposes, so HMRC uses the equivalent of what the rent would be if let from year to year.
The annual value represents a rent-equivalent charge. Even if the employer did not pay any market rent for the property (for example, because they purchased it outright), the basic charge still applies as if a notional rent were being paid.
Where the employer is renting the property and the rent paid exceeds the annual value, the benefit is the higher figure — the actual rent paid by the employer.
The Additional Charge: Expensive Property Over £75,000
Where the cost to the employer (purchase price plus any improvements made before the relevant tax year) exceeds £75,000, an additional benefit in kind charge applies. The additional charge is calculated as:
(Employer's cost − £75,000) × official rate of interest
For 2025/26, the official rate is 2.25%. So if the employer's cost is £200,000, the additional charge is (£200,000 − £75,000) × 2.25% = £2,812.50 per year.
The additional charge sits on top of the basic annual value charge. Both charges are reduced by any rent the employee pays to the employer, and the net amount is the taxable benefit.
The 6-Year Rule
The 6-year rule modifies the additional charge calculation for long-held properties. If the employer has owned the property for more than 6 years before first making it available to the employee, the additional charge uses the market value at the date the property was first provided rather than the original cost.
This rule was designed to prevent employers from avoiding the additional charge by holding property for a long time before providing it. Where market value at date of first provision exceeds the original cost, the higher market value is used — which typically increases the charge on properties that have appreciated significantly.
Example: employer bought a property for £90,000 in 2010 and first provided it to an employee in 2016, when the market value was £150,000. The additional charge uses £150,000 not £90,000. Additional charge = (£150,000 − £75,000) × 2.25% = £1,687.50 per year.
Job-Related Accommodation Exemptions
Not all employer-provided accommodation is taxable. The accommodation is entirely exempt from benefit in kind where it meets one of three conditions:
| Condition | Examples |
|---|---|
| Customary to provide accommodation for that type of work | Agricultural workers, pub managers, hotel staff, police officers, members of the armed forces, caretakers, clergy |
| Necessary for proper performance of duties | Offshore oil and gas workers, certain government employees, remote site workers where proximity is essential |
| Special security threat to the employee | Senior government ministers, security service employees, specific at-risk individuals certified by HMRC |
For directors, the exemption is further restricted. A director can only benefit from the exemption if they own 5% or less of the company's ordinary share capital and work full-time as an employee or director of the company or an associated company, or the company is non-profit. Controlling directors and owner-managers cannot claim the job-related accommodation exemption.
Frequently Asked Questions
When is employer-provided accommodation exempt from benefit in kind?
Accommodation is exempt where it is job-related: (1) it is customary for the type of employment, (2) it is necessary for the proper performance of the employee's duties, or (3) there is a special security threat. The exemption does not apply to most directors.
What is the basic charge for living accommodation BIK?
The basic charge is the annual value of the accommodation — essentially the gross rateable value or an equivalent market rental value assessed by HMRC. This applies regardless of whether the property is expensive or not.
When does the additional charge for expensive property apply?
An additional charge applies when the cost of the property to the employer exceeds £75,000. The additional charge is: (cost to employer − £75,000) × HMRC official rate. If the property has been provided for more than 6 years, market value at date first provided is used instead of cost.
What is the £75,000 threshold for the additional accommodation charge?
Where the cost of providing accommodation exceeds £75,000, an additional benefit in kind charge arises. The excess above £75,000 is multiplied by the official rate (2.25% for 2025/26) to produce the additional annual benefit.
Does the employee's contribution reduce the benefit?
Yes. Any amount the employee pays towards the accommodation is deducted from the total benefit before calculating the taxable charge. The net benefit cannot be less than zero.
Can a director claim the job-related accommodation exemption?
A director can only claim the exemption if they own 5% or less of the company's share capital and work full-time for the company or an associated company, or if the company is non-profit or a charity. Most controlling directors cannot benefit from the exemption.
How is the annual value of accommodation determined?
The annual value is typically the property's gross rateable value. For properties without a rateable value, HMRC uses an equivalent rental value based on market rents for similar properties in the area.
Is the accommodation benefit subject to National Insurance?
The employer pays Class 1A NIC at 13.8% on the taxable benefit. There is no employee Class 1 NIC on accommodation benefits in kind. Employees pay income tax at their marginal rate through self-assessment or PAYE.
Are there special rules for job-related accommodation and associated benefits?
Where accommodation itself is exempt as job-related, ancillary benefits provided in connection with the accommodation may also be reduced in certain cases. However, the rules are complex and exemptions do not apply automatically to all connected costs.
What happens if the employer rents rather than owns the accommodation?
If the employer rents the accommodation, the basic charge is the higher of the annual value or the rent paid by the employer. The additional expensive property charge generally does not apply to rented properties.
What is the 6-year rule for the additional accommodation charge?
If the property has been owned by the employer for more than 6 years before it was first made available to the employee, the additional charge is based on the market value of the property when first made available — not the original cost. This can substantially increase the charge for properties that have risen in value.
How should employers report accommodation benefits?
Employers report accommodation benefits on form P11D after the end of each tax year. The deadline is 6 July. Class 1A NIC is paid via form P11D(b) by 19 July. Employees pay income tax through self-assessment or an adjusted PAYE code.