What is a P11D Form? Understanding Benefits in Kind and Your Taxes

 

The world of taxes can be a labyrinth, and the P11D form can seem like another cryptic part of it. But if you’re an employee in the UK who receives certain perks from your employer, understanding P11Ds is crucial. Here’s a breakdown to shed some light on this process.

What is a P11D?

A P11D is a form used by employers in the UK to report specific taxable benefits provided to their employees throughout the year. These benefits are known as “benefits in kind” (BIKs) and encompass anything valuable you receive beyond your regular salary.

What Kind of Benefits Are Reported on a P11D?

Common BIKs include:

  • Company cars
  • Private medical insurance
  • Fuel benefits (like company fuel cards or subsidised fuel purchases)
  • Season ticket loans for commuting
  • Interest-free or low-interest loans from your employer

Who Pays the P11D Tax?

The responsibility for paying tax on BIKs depends on how they are taxed:

  • Payrolled Benefits: If your employer incorporates the benefit’s tax deductions into your regular salary through the PAYE (Pay As You Earn) system, then you won’t need to take any further tax action. The tax is already deducted at the source.
  • Benefits Reported on P11D: For benefits listed on a P11D, the tax is typically added to your income tax bill. You’ll settle this when you complete your Self Assessment tax return, which is an annual tax form submitted to HMRC (HM Revenue and Customs), the UK tax authority.

How is the P11D Tax Calculated?

HMRC assigns a cash equivalent value to each BIK. This value is then added to your salary for tax purposes. The amount of tax you pay depends on your income tax band. For instance, if you fall into the basic tax band, you won’t pay any tax on the first portion of your income, but you’ll pay a higher rate on earnings exceeding that threshold.

Read also: What is an SA302?

When Do P11D Forms Need to Be Completed?

Employers: Employers have a deadline to complete and submit P11Ds to HMRC by July 6th following the tax year. For example, the P11D for the 2023/24 tax year (ending April 5th, 2024) needs to be submitted by July 6th, 2024. It’s important to note that as of March 2023, HMRC no longer accepts paper submissions; all filings must be done electronically.

Employees: You likely won’t be directly involved in completing the P11D, but your employer should provide you with a copy or inform you of the value of any BIKs included on your form. You’ll use this information when calculating your tax bill on your Self Assessment tax return.

Read also: What is a CWF1 Form?

Future Changes to P11Ds

The UK government is planning to streamline the P11D process. From April 2026, the responsibility for reporting BIKs may shift to employers’ payroll systems, potentially eliminating the need for separate P11D forms. This could simplify the process for both employers and employees.

Historical Context and Practical Implications

Pre-2016, employers applied for a ‘dispensation’ to exclude non-taxable expenses from P11D reporting. Post-2016, a statutory exemption for reimbursed expenses was enacted, removing the need for such dispensations. Employers could also choose to ‘informally’ payroll other non-reimbursed expenses and BIKs, with HMRC’s agreement, ensuring real-time tax and National Insurance contributions (NICs) calculations. However, since April 2023, new employers or those wanting to payroll for the first time must register via HMRC’s online service by April 2024.

Mandated Payrolling from 2026

As part of modernising the tax system, HMRC will mandate the payrolling of all expenses and BIKs from April 2026. This means employers will need to include all benefits in their payroll calculations, which could affect how employees’ wages are handled, particularly in instances of overlapping tax years or fluctuating benefit values.

Practical Tips for Employers

Employers should start preparing for these changes now, including considering the impact on employees’ wages and how to manage last-minute benefit changes for leavers. Special consideration is needed for high BIK implications like company cars.

Conclusion

Don’t let tax season be a stressful time. Contact TaxAce Ltd Accountants today for a free consultation and see how they can help you navigate the complexities of the UK tax system.

Contabila UK - Founder and CEO -TaxAce - Iurie Bivol

Iurie Bivol

Director TAXACE LTD

Entrepreneur and accountant with 15 years of experience in the UK.

Contabilitate UK - Senior Tax Assistant - Alina Costreie

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