This article explains how to enter a beneficial loan as a Benefit in Kind (BIK) in BrightPay and how BrightPay calculates the taxable benefit using the averaging method. It also covers how to make manual adjustments where you have calculated the benefit using the precise method.

1. Open the employee record and go to Expenses & Benefits (P11D)

1. Open the relevant employer file in BrightPay.
2. Select the employee for whom you wish to record the beneficial loan.
3. Within the employee’s record, select the Expenses & Benefits (P11D) tab. This is where all P11D benefits, including beneficial loans, are entered.

2. Add the beneficial loan (BIK)

1. Click to add a new benefit and choose Loans.

2. Enter the loan details, including:

    
   • Opening balance
   • Closing balance
   • Date loan was made available
   • Amount of interest paid by the borrower
   • Number of months the loan was outstanding

BrightPay will then calculate the taxable benefit using the averaging method (see section 3 below).

3. How BrightPay calculates the benefit – averaging method

BrightPay uses the averaging method only when calculating beneficial loan interest.

Under the averaging method:

1. Calculate the average balance:
   (Opening balance + Closing balance) ÷ 2 = Average balance
2. Apply the number of tax months the loan was outstanding:
   Average balance × number of tax months outstanding = Amount subject to interest
3. Apply the official rate of interest for the tax year:
   For the 2025/26 tax year, an official rate of 3.75% is used.

BrightPay performs this averaging calculation automatically based on the figures you enter.

4. Overriding the calculation using the precise method

If you have calculated the cash equivalent using the precise method and this produces a more favourable result for the employee, you can override the amount BrightPay has calculated.

To adjust the benefit:

1. Work out the difference between:
   • the cash equivalent calculated by BrightPay (using the averaging method), and
   • the cash equivalent you have calculated manually (using the precise method).
2. Enter this difference in the Total interest paid by the borrower field.

Entering a higher total interest paid by the borrower will reduce the calculated cash equivalent accordingly.

Important:
This adjustment must be calculated and entered manually. BrightPay does not perform the precise method calculation automatically.

5. Review and save

1. Check all loan and interest details entered on the benefit.
2. Confirm that any manual adjustment (if applicable) in Total interest paid by the borrower reflects your precise method calculation.
3. Click Save.

The beneficial loan will now be included in the employee’s payroll records and P11D reporting as appropriate.