From flexible working to a free lunch, many businesses offer benefits on top of a salary as a way to attract, retain and incentivise staff.
As an employer, you’re responsible for reporting these to HMRC, paying tax and National Insurance if it applies.
This has to be done every year through a form called ‘P11D’.
What is a P11D?
A P11D form is used to report any expenses and benefits your employees receive from your business.
This could include the benefits you receive yourself if you’re the director of a limited company. If you operate as a sole trader and have no employees, you don’t need to complete one – instead, you can deal with your expenses through your self-assessment tax return.
This needs to be completed for every employee who’s received benefits and sent to HMRC by 6 July after the end of the tax year.
In addition, you’ll need to complete a P11D(b) form, which sums up the total amount of National Insurance owed to HMRC based on the individual P11Ds.
As an employer, you then need to pay class 1A National Insurance on those benefits by 22 July.
What needs to be included in a P11D?
You’ll need to include all benefits in kind in your P11D form, excluding a few exemptions.
These are items or services that your employees receive in addition to their salaries, such as company cars, phones, health insurance, travel expenses, and more.
You can find a complete list of expenses on the Government’s website, with different rules for each on how to calculate and report them.
The exemptions for reporting include things like routine business travel, phone bills and uniforms – although these will only qualify if you’re paying a flat rate to your employees for purchasing them, a ‘bespoke’ rate that’s been approved by HMRC, or the actual costs back to the employee.
Paying tax on benefits through payroll
An alternative option to submitting P11Ds is processing the tax through payroll.
If you choose this option, you’ll need to register with HMRC before the start of the tax year, then continue to payroll your benefits for the whole tax year or until you stop providing them.
If you manage all of an employee’s benefits this way, you won’t be required to submit a P11D form for them. You will, however, still need to calculate the National Insurance due and complete a P11D(b).
Support with P11Ds and payroll
Figuring out what needs to be reported, calculating the various rates and putting it all together to report to HMRC can be a hassle, especially when you’ve got other work to do in your business.
To us, it makes sense to use technology to your advantage. We offer a flexible, cloud-managed payroll service which makes it easy to meet your responsibilities throughout the year for all your employees, handling your regular paperwork, payments and deductions, and tax obligations.