Regular salaries are covered under PAYE, with employers having to calculate and pay income tax and National Insurance. Other benefits supplied to staff may also be liable for tax, which is why business owners may need to complete a P11D form every year.
To help you understand your company’s obligations, our P11D guide aims to answer the following key questions.
What is a P11D form?
Very simply, it is a document used by businesses to report all benefits in kind to HMRC. You will need to include any goods or services you and/or your workers receive from your company in addition to your regular salary (e.g. a company vehicle).
The employee is then taxed for the benefits received through their self-assessment tax return (if required to prepare one) or by adjustment to their PAYE coding notice.
Do I need to complete a P11D?
P11D forms are filed with HMRC by employers, not staff. However, it’s worth noting that many freelancers or contractors get paid via their own limited companies so technically they are also employers.
The annual deadline for P11D forms is July 6, which will cover the nearest complete tax year.
Which benefits need to be recorded?
Any employee benefits which are paid for by the company must be included on your business’s P11D form. Common examples include:
- Company vehicles and fuel
- Other loans or financial benefits
- Private health insurance
- Staff entertainment including social events
- Reward schemes with non cash rewards
- Self-assessment accountancy fees
- Non-business travel or entertainment expenses
- Any goods or assets with personal use.
Generally, the benefits that can be directly attributable to an employee need to be recorded. If this is not possible to calculate for example a team building weekend away, then a PAYE Settlement Agreement may be more relevant. To find out more read our PAYE Settlement Agreement blog here.
Should I record directors’ loans?
Directors are not required to pay interest on money owed to the company of up to £10,000. However, if the directors’ loan account is overdrawn by more than £10,000, HMRC will need to see that interest is paid (2.25% for the 2023/24 tax year) by the benefitting director.
The overdrawn money is seen as a loan to the director from the company, and is classed as benefit so must be documented on the director’s P11D form.
Do I have to pay additional National Insurance on the benefits provided to employees?
Yes. Employers are required to pay Class 1A National Insurance contributions on work benefits provided to employees. The Class 1A National Insurance rate is 13.80% for 2023/24 tax year.
Are there exceptions where benefits are non taxable?
Yes. These include:
- Annual social events where the cost stays below a threshold
- Low interest loans below a certain value
- A mobile phone provided to an employee
- Monetarily ‘trivial’ benefits in kind
What are the penalties?
Don’t worry, if you miss the July 6 filing deadline, you will have around a fortnight to complete and file your P11D form. If HMRC still hasn’t received anything, your company will be fined £100 per month per 50 employees.
If you file your P11D, but it is inaccurate, you could also be fined. Genuine mistakes will not be punished, but be aware that penalties of 30%, 70% or even 100% of the owed tax can be enforced if HMRC finds evidence of deliberate attempts to conceal your tax liabilities.
What is a P11D(b) form?
The form P11D(b) is used by the company to inform HMRC about all the P11D forms they’ve submitted for their employees.
The next step
Should you have any questions on your P11D reporting or need any support, please contact Alison Price on a.price@uhy-uk.com or your usual UHY advisor.
