Tax Advice

What Is a P11D Form in the U.K., and Why Does It Matter?

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!

 

What’s a P11D Form For?

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.

Official Deadline

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.

What Does a P11D Form Include?

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’:

• Spouse or civil partner
• Sons and daughters and their spouses or civil partners
• His or her parents
• Servants
• Dependents
• Guests

The type of facility, benefit, or expense includes, but isn’t limited to:

• Private medical insurance or treatment
• Living accommodation
• Relocation costs
• Mileage and fuel payments
• Credit cards and vouchers
• Transference of business assets to employees (e.g., goods or company cars)
• Beneficial loans: From the company, with low or interest-free loans if the loan amount is more than £10,000
• Payments made by the business on behalf of the employee or director

HMRC provides employers with useful Working Sheets to help you work out the cash value of some of these benefits and expenses.

• Living accommodation
• Cars and car fuel
• Vans
• Low or no-interest loans
• Relocation expenses
• Mileage allowance payments

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.

P11D Exemptions

There’s a list of common business expenses that don’t have to be included on your P11D forms.

These include:

• Business credit cards
• Work travel
• Entertainment expenses for business purposes
• Subscriptions and fees for professional bodies or journals
• Uniform
• Tools for work

That shortens the list a bit, doesn’t it?

How Do I Submit P11D Forms?

There are 2 options for P11D form submission:

• HMRC’s PAYE online service: This is only an option if you have no more than 500 employees
• Your own payroll or accounting software (If you use FreshBooks, try one of these HMRC-compliant payroll options)

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.

Who Pays the P11D Tax Bill?

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…

Form P11D(b)

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.

Can I Give Employee Benefits Without the P11D Paperwork?

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.