What is P11D and how does it work?
23/03/2023
As a business owner, managing taxes and employee benefits can be a complicated process.
Getting your head around the P11D form and when you need to file it can be challenging but it is crucial.
What is P11D?
You need to report certain benefits and expenses that you provide for your employees in the P11D form.
This includes any benefits-in-kind (BIK), such as company cars, interest-free loans for travel season tickets, or private healthcare amongst others.
These benefits essentially increase your employees’ salary, so you need to inform HM Revenue & Customs (HMRC) about these benefits, as they will be subject to tax and National Insurance Contributions (NICs).
If these benefits are payrolled and the tax due is paid throughout the year, you will not need to submit a P11D form.
How does P11D work?
Identify the benefits
Firstly, you must identify the benefits in kind that you provide to your employees. You can find out more about this in our last blog.
Some expenses and benefits do not need to be included in the P11D form, including:
- Business Travel
- Business entertainment expenses
- Credit cards used for business purposes
- Fees and subscriptions.
- Late filing penalties
Calculate the value
Then you must calculate the value of these benefits.
This value will depend on the specific benefit and may be subject to specific rules and guidelines provided by HMRC. Keep in mind that some benefits have a fixed value, while others may require calculations based on the employee’s usage or circumstances.
Meet the deadline
After calculating the value of all benefits in kind, you must complete and submit the P11D form to HMRC. This form must be submitted by 6 July following the end of the tax year. Failure to submit the P11D on time may result in penalties for your business.
Pay tax and NICs
Once the P11D forms are submitted, you’ll need to pay any Class 1A NICs owed on the BIK.
This payment is due by 22nd July (or 19th July if paying by cheque) following the end of the tax year. The employees will also be taxed on the value of the benefits they receive, which will be reflected in their PAYE tax code.
What common mistakes should you avoid?
You need to avoid miscalculating the value of benefits or including the wrong information.
If you do make a mistake, you must send a paper P11D form which includes all the benefits and expenses for that tax year.
Make sure you keep clear records so that you do not miss any benefits or expenses that should be included in the form. Cloud accounting solutions are a great method for keeping all the information you need in one place.
If you aren’t sure what to include, it’s essential to seek advice from an accountant.
Want support with the headache of P11D forms? Get in touch with our team today.
