As we all continually seek to obtain tax advantages wherever possible, one area HMRC clamped down on was “perks” for employees and directors.
If you provide an employee or director with a perk like the use of a company car, private medical insurance or a gym membership, HMRC deem these to be rewards for services and therefore, treat them as alternative types of pay. Because such perks are not currently reported through the payroll, HMRC tax them through the Expenses and Benefits regime instead.
It’s worth stressing that, with our tax planning assistance, we can avoid many adverse tax consequences – however, this does not necessarily remove the burden of reporting such benefits to HMRC. Below are some frequently asked questions to help you navigate HMRC’s requirements for benefits-in-kind.

What is a P11D?

Currently, benefits are not included on the payroll in the same way as salary. Instead, benefits need to be disclosed on an annual declaration form known as a P11D.

This form reports all additional benefits that you have provided to staff throughout the tax year which have not already been included on an RTI payroll submission. HMRC are then able to collect the tax due on these benefits (via adjustment of the employee’s tax code or via self-assessment) and the national insurance due from the employer (via a separate tax payment – known as Class 1A national insurance).
Annual P11D declarations are due for filing on 6th July, and the employer is required to pay the national insurance due by 22nd July.
We should mention that HMRC are in the process of implementing an RTI approach to benefits. The “Payrolling Benefits” regime was due to be mandatory from next year, but it has been postponed until April 2027. Further information can be found on our earlier blog.

Can you give some examples of what may need to be reported on a P11D?

The two main reportable benefits we see often are:

• Use of a company car / van (and provision of fuel)
• Payment of medical or health insurance

HMRC have a helpful A-Z list on their website noting some other common benefits and whether they need to be reported or not.

We reimburse our employees for general business expenses, would these need to be reported on a P11D?

Many routine expenses that you pay on behalf of employees are exempt from having to be reported – below are a few examples:

• Reimbursing an employee’s business travel (i.e., travelling to a course).
• Paying for parking spaces for employees to use provided they are at or near your workplace.
• Reimbursing an employee’s parking charges providing the car park is at or near your workplace.
• Paying for an employee’s mobile phone provided the contract is between you and the supplier.
• Lending or hiring bikes to employees provided they are available to all and are mainly used for getting to work.
• Annual staff parties open to all employees provided the overall cost is less than £150 per head.
• Reimbursing an employee for their annual professional fees provided the organisation is on HMRC’s approved list (i.e., GDC; BADN; BSDHT; etc.).
• Small irregular gifts that you provide to your employees that are less than £50 in value (known as “Trivial benefits”).

If you have any other employee payments, please get in touch and we can advise if they would be classed as a reportable benefit.

I’m a Director and I purchased an electric vehicle through my company this year, do I need to report this on a P11D?

Yes, your use of the company car will need to be reported on a P11D in the tax year you purchased the vehicle and each subsequent tax year. The taxable benefit due will be based on the car’s original list price combined with a percentage from a sliding scale linked to the emissions of your vehicle. For zero emission vehicles in 2024/25, the percentage is 2% but this will rise by 1% each year for the next 3 years. Please note, the benefit is always based on the original list price whether you purchased a new car or a second-hand car.
For example, for a zero-emission vehicle owned for a full year with a list price of £50,500:

• The taxable benefit in 2024/25 would be £1,010 (£50,500 × 2%) – this is the amount that you will be taxed on and will be included on your tax return.
• In addition, your company would be due to pay Class 1A national insurance of £139.38 (£1,010 × 13.8%).

We have a business health insurance policy to cover the private medical care for our team. How is that reported on the P11D?

The insurance provider will be able to produce a report showing how the monthly premiums are split by the members of the policy. That information is used to produce a P11D for each employee covered by the policy, with the resulting taxable benefit being equal to the employee’s share of the monthly premiums paid over the tax year.

For example, for a policy covering two employees with premiums of £240 per month:

• Employee 1 – Share is £100 per month so over the course of the tax year, the cost and taxable benefit would be £1,200 – this is the amount that would be taxed and HMRC will likely amend their tax code to recover the tax over the remainder of the year (i.e. the tax cost to the employee at basic rate would be £240 – £20 per month).
• Employee 2 – Share is £140 per month so over the course of the tax year, the cost and taxable benefit would be £1,680 – this is the amount that would be taxed and HMRC will likely amend their tax code to recover the tax over the remainder of the year (i.e. the tax cost to the employee at basic rate would be £336 – £28 per month).
• In addition, the business would be due to pay Class 1A national insurance on the total taxable benefits – £397.44 (£1,200 + £1,680 = £2,880 × 13.8%).

What happens if I don’t file a P11D on time?

There is an automatic late filing penalty of £100, with a further £100 for every month the form is not filed. The maximum penalty that can be charged is equal to the outstanding Class 1A national insurance.

If you’d like our assistance with reporting employee benefits or further information on our payroll services in general, please get in touch.