P11D Benefits and Expenses

What are P11D benefits?

P11D benefits refer to benefits and expenses reported on the P11D form – the mandatory document UK businesses use to report benefits paid to directors and employees that haven’t been subject to PAYE. HMRC requires your company to report these P11D benefits annually after 5th April by the 6th July deadline.

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Understanding P11D Benefits Reporting

P11D benefits encompass all taxable benefits and expenses that must be declared to HMRC. The P11D form captures these P11D benefits to ensure proper tax treatment and compliance.

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What is a P11D (b)?

A P11D (b) is the form that is sent to HMRC with the P11D showing the amount of any additional tax or Class 1A National Insurance due on the expenses and benefits. Where no benefits have been paid during the tax year ending 5 April  and a form P11D(b) or P11D(b) reminder is received, employers can either:

• Submit a ‘nil’ return
• Complete the Employer – No return of Class 1A form, to advise that they have no P11D to submit and no Class 1A return to make.

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P11D Benefits: What Must Be Included?

Essentially, taxable expenses and the cash equivalent of company assets provided for the private use of a director or employee will need to be reported on the form. Both are referred to as benefits in kind.

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What are taxable expenses?

They are expenses that the business pays for, but have a personal benefit to the employee: e.g gym membership or private healthcare payments. The amount to declare on the P11D is the cost of the expense.

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What are benefits in kind?

Where the business incurs costs or provides assets for the private use of an employee or director, these normally result in a Benefit in Kind charge. Where an asset is provided for private use, the amount to report on the P11D is the cash equivalent value –how this is calculated is dependent on the asset.

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Common P11D Benefits Examples

The following are examples of taxable benefits and expenses which you should tell us about:

1. Asset transfers: Assets paid for by the company and transferred to your employee at no cost or below market value, e.g. Personal items paid for using company cheques or credit cards and money not refunded to the company;
2. Personal payments: Payments made on behalf of the employee, e.g. paying personal bills from the business account or with a business credit card, where these are not fully reimbursed;
3. Vouchers and credit cards: Vouchers (in the case of child care vouchers, any excess over £55 per week ) or credit cards, e.g. using company credit cards to fund personal expenditure;
4. Living accommodation:  The cash value of the living accommodation is regarded as a benefit.
5. Mileage allowance: Amounts in excess of the HMRC approved rates;
6. Company cars and fuel: Cars, vans and/or fuel provided by the company and available for private use (in the case of vans, incidental private use can be ignored);
7. Interest-free loans: Low or interest-free loans, often referred to as director’s loans ( where no interest is charged);
8. Private medical or dental insurance paid for from the company account;
9. Personal asset use: Assets placed at the employees’ disposal, e.g. motorcycles, holiday homes;
10. Professional fees, subscriptions: Some subscriptions to professional bodies may be exempt.
11. Training: Only work-related training is allowable and only if paid for or reimbursed by the company.
12. Personal phone contracts: Telephones and mobile phones – unless the contracts are in the business name.

For a full list of P11D benefits, read HMRC’s list of expenses and benefits

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Does having a P11D mean the employee pays more tax?

There is a requirement to report benefits in kind on the form and record these benefits of employment on their self-assessment return ( if they have one), and the benefits are taxable. Taxable benefits are normally adjusted by HMRC in their PAYE tax code to ensure that tax is collected throughout the year rather than ending up with tax underpaid at the end of the year. If they do not complete a tax return, HMRC will amend their tax code to collect the tax due.

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What if the employee only has reimbursed expenses and no benefits in kind?

You will not require a copy of a P11D form as there are no benefits in kind to report. The business, however, is still obliged to confirm to HMRC that there are no benefits in kind to report and no Class 1A National Insurance to pay as part of the P11D process.

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What is Class 1a National Insurance?

Certain benefits attract additional National Insurance contributions (NIC); this is known as Class 1A NIC. It is an employer liability, which is a cost to your business. It is calculated at 13.8% of the total value of any benefits liable to Class 1A. The Class 1A NIC is payable to HMRC by 19th July 2024 (in the case of 23/24).

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How can I pay the Class 1a NIC?

As an employer, you will be issued a separate special payslip for paying the Class1A due, or it can be paid via an approved electronic method. Please refer to HMRC website.

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What if I have paid benefits but do not have a PAYE scheme?

You will need to register as an employer as soon as possible, as without a scheme, you cannot submit a P11D, and there are penalties for being late.

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Paying tax on your benefits through your payroll

You can deduct and pay tax on most employee expenses through your payroll (sometimes called ‘payrolling’) as long as you’ve registered with HMRC before the start of the tax year (6 April). You do not need to submit a P11D form for an employee if you’re paying tax on all their benefits through your payroll.