P11D forms are an essential aspect of accounting for many businesses in the UK. If a company offers any benefits in kind, that company must have a P11D form filed each tax year.
The P11D form is used to report all of the employee benefits that a company pays for that are not related to business or covered by business expenses.
Completing P11D forms can be time-consuming and complex, which is why many businesses choose to hire professional accountants and payroll experts to ensure that their P11D forms are filed on schedule every year.
If you’re wondering ‘what is P11D and benefit in kind?‘, this article answers all of your questions. Let’s explore how you can use the P11D form to report benefits in kind and consider how this might affect an organisation’s accounts each tax period.
What is the P11D form?
The P11D form is used to report benefits in kind. Benefits in kind are items or services that company owners or employees receive from their company in addition to their standard salary.
Some common examples of benefits in kind include:
- Private healthcare
- Company cars
- Interest-free loans
- Non-business travel and entertainment expenses
- Self-assessment fees that are paid by the company
- Assets provided by the company that have significant personal use
It is the responsibility of employers, not employees, to file P11D forms annually. However, for freelancers and contractors, this might mean filing a P11D form for yourself alongside your self-assessment tax return.
The P11D form is due every year by the 6th of July following the end of that tax year, so for the 2022/23 tax year, the P11D form will be due by the 6th of July 2023.
How does the P11D form affect tax and NI?
To better understand ‘what is P11D and benefit in kind?’, it’s important to understand the impact that benefits in kind could have on your company’s accounts.
Depending on what is declared on the P11D forms, benefits in kind could impact the amount of tax and National Insurance that employees and employers pay, respectively.
Once benefits in kind have been declared, the HMRC will take this into consideration when calculating an employee’s tax due, and may charge employees additional tax on the value of the benefits they receive from their employer.
Benefits in kind might also increase the amount of National Insurance that employers must pay in a tax year, charged at 13.8% of the determined value of the benefits in kind they provide.
However, some benefits in kind may not incur any additional tax or National Insurance.
Some examples of benefits in kind that don’t usually mean paying extra tax include:
- Meals provided at reasonable cost in a staff canteen
- Some costs of travel, such as a bus to work
- Work-related training
- Mobile phone contracts primarily for business use
- Protective clothing and equipment
Even though most benefits in kind are subject to both income tax and employer’s National Insurance, they are not subject to the National Insurance that employees pay, which is the equivalent of an 11% saving on the cost of the benefit.
If a company can offer attractive benefits that employees genuinely want, they can effectively reduce the real cost of staff remuneration by offering benefits in kind in place of higher salaries.
How to file your P11D forms
There are lots of different ways to file a P11D form. You can do it online using the HMRC’s PAYE online service, HMRC’s Online End of Year Expenses and Benefits Service, or by using commercial payroll software.
You might also be asked to fill in a P11D(b) form, which is simply a form that summarises the individual P11D forms that they’ve completed for each of their employees.
There are penalties for filing a P11D form late. If you miss the 6th of July deadline by a week or two, HMRC will give you the chance to file your P11D form without incurring a penalty immediately.
If you still haven’t filed the form by the 19th of July, the HMRC will charge you a penalty of £100 per month per 50 employees in your company.
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