As a thoughtful employer, you may provide your employees with facilities, benefits, or expenses in addition to their salary. Lots of them are in HMRC’s ‘taxable’ category.
Form P11D is the way you must report the cash value of these expenses and benefits to HMRC. Then, the tax office will decide how much income tax and employer’s National Insurance contributions (NICs) are owed as a result. No good deed goes unpunished, as they say!
As a U.K. employer, you’re legally responsible for filing P11D forms with HMRC. You must complete an individual P11D form for every employee and director.
These reports must be with HMRC by 6 July following the end of the tax year. For example, the 2023–24 tax year ends on 5 April 2024. Your P11D forms must be submitted by 6 July 2024.
There is a financial penalty if you’re late filing your P11Ds. You’ll have to pay £100 per 50 employees for each month (or part of the month) that your P11D form is late.
Time to get into the details. You must report the details of any expenses, ‘payments, benefits, and facilities’ given to employees, directors, or their ‘family or household’. HMRC is very clear in its definition of family or household: They are the employees’ or directors’:
The type of facility, benefit, or expense includes, but isn’t limited to:
HMRC provides employers with useful Working Sheets to help you work out the cash value of some of these benefits and expenses.
As well as all these expenses and benefits, you’ll need to include your employer’s PAYE reference number and each employee’s name, gender, date of birth, and National Insurance number.
There’s a list of common business expenses that don’t have to be included on your P11D forms.
These include:
That shortens the list a bit, doesn’t it?
There are 2 options for P11D form submission:
Note that paper forms are not accepted.
You must give your employees and directors copies of their P11D forms for their records. You can provide them electronically or as a hard copy. This is especially important if they are required to complete a Self Assessment tax return.
The tax owed on benefits and expenses is paid by your employees. Usually, HMRC adjusts its PAYE tax codes to accommodate the extra income tax. Then you deduct the additional amount, as usual, through the PAYE system straight to the Treasury.
It’s worthwhile to regularly remind all your employees to check their tax code is correct. Otherwise, they’re paying either too much tax or not enough. Whenever they get their notice of coding, they should double-check it and get in touch with HMRC if it doesn’t look right. The sooner any mistakes are rectified, the better it is for everyone.
Unfortunately, you also have to pay Class 1A NICs on these taxable benefits and expenses. Which leads us neatly onto…
Employers must fill in form P11D(b) to tell HMRC how much Class 1A NICs you need to pay on all the expenses and benefits you give your employees and directors. This payment must be made online by 22nd July, after the end of the tax year.
You must complete a P11D(b) whenever you submit P11D forms, or if you pay benefits and expenses through payroll, or if HMRC requests it. But you only need to submit one P11D(b) summarising the P11D totals for the tax year.
If HMRC requests a P11D(b) but you’ve no Class 1A National Insurance to pay, then you fill in this declaration instead.
You can use your payroll system to deduct the tax on the majority of employee benefits and expenses. This is called payrolling, or payrolling benefits in kind, and it means that you don’t have to file individual P11D forms. You do, however, have to register these benefits and expenses online with the HMRC prior to the start of the tax year (April 6) in order to do this.
Choosing to payroll employee benefits means that their cash value is totalled for a year. And you deduct the tax through your payroll system. You must tell your employees if you’re doing it this way and give them a benefits statement by 1 June after the tax year ends. This only exempts you from the P11D forms. Don’t forget that you still need to submit that P11D(b) form to report the Class 1A National Insurance you owe.
This post was updated in January 2024.