Whether you are an employer or a freelancer, it is your responsibility to submit the relevant forms to the tax office and declare the tax you owe each year. Employers can face heavy fines if they do not submit their forms to the tax office before the deadlines, or if the right amount of tax is not paid.
As a business owner or employer, it can be a little confusing as to what you need to submit and when. Thankfully, each form you are required to fill in can be broken down into simple steps.
In this article, we will focus on the P11D form, what it is, who needs to complete it, key deadlines for submission, along with what benefits are considered taxable or tax-free.
A P11D is a mandatory tax return form filled out by employers and returned to the HM Revenue and Customs (HMRC) tax office. It shows the expenses and employee benefits, otherwise referred to as "benefits in kind". These are additional services or perks that you, or your employees, receive on top of a salary, such as healthcare, a work mobile phone, or company cars. These additions are not necessary for employees to carry out their contractual duties.
Benefits paid to employees can increase their overall salaries, meaning as an employer, you will be required to pay Class 1A and 1B National Insurance contributions on work benefits given to employees. You will also pay Class 1A National Insurance on redundancy payments of £30,000 or more, provided you have not already paid Class 1 National Insurance contributions on them.
Who has to file a P11D form?
The P11D form is filled out and filed by employers, then sent to the tax office. It is possible to be both an employer and an employee, for example, if you are a freelancer or contractor. If you are an employee, you should get a copy of your P11D for your records.
Who pays National Insurance and Income Tax on Benefits in Kind?
For employees, your employer will provide the necessary details to the tax office so they can update your PAYE account with the employment benefits you receive. To receive a P11D form as an employee, you will need to:
- Earn at least £8,500 or more during the tax year which starts in April and runs to the following one.
- Receive benefits in kind that are classified as additional income and increase your total salary
If both of these apply, you will receive a lower tax code and pay more Income Tax, provided the benefits you receive are considered taxable. As an employee, you are not liable to pay National Insurance on benefits in kind. However, you will pay Income Tax on the cash value of the benefits you receive — your Income Tax band will determine the amount you pay.
If you are an employer providing benefits in kind to your employees, you will pay Class 1A and 1B National Insurance on expenses and benefits given to your employees in addition to their salaries. The current rate of National Insurance for the 2021-2022 tax year is 13.8%.
What is included in a P11D form?
Benefits in kind fall into two categories: taxable and tax-free. Taxable benefits and expenses are not necessary for an individual to carry out their job role. Examples of company benefits that require employers to declare them and pay National Insurance contributions are:
- Company cars and mileage allowance
- Cheap or interest-free loans
- Health insurance
- Mobile phones
- Some professional fees and subscriptions
- Season rail tickets
- Assets for personal use by an employee
Generally, anything that is an additional benefit on top of an employee's salary will be taxable and must be included on the form P11D.
P11D Exemptions for Business Expenses
There are certain expenses payments that are exempt from NI and Income Tax, including:
- Those necessary for an employee to carry out their contractual duties (including work uniform)
- Qualifying business travel
- Business entertainment e.g. Christmas parties costing less than £150 per head, and open to the entire company
- Phone bills.
When filling out a P11D as an employer, you will need to include most company benefits, however, you are not required to include the former exemptions.
What is a P11D (b)?
Employers are required to fill in a form P11D for each individual employee and a form P11D (b) summarises the P11D forms that employers submit. It shows the total of the Class 1A National Insurance contributions that you owe to HMRC.
Not all employers will need to fill out a P11D (b), however, if HMRC requests one, it is submitted at the same time as the P11D form. The deadline for submitting a P11D (b) is 6 July.
How do I fill out and return a P11D form?
There are several methods that can be used to fill out your company expenses and benefits report at the end of the tax year:
- Commercial payroll software - This is used to run payroll as an employer, and it must report PAYE information online.
- HMRC's PAYE services (Online) - This is for companies with up to 500 employees
- HMRC's End of Year Expenses and Benefits service (Online) - Filled out using the interactive PDF forms on the government website.
- By post - Only to be used if you cannot use any other online methods.
When filling out your P11D forms, use a separate one for each director or relevant employee and provide them with a copy. Companies do not need to fill out a P11D if there are no taxable expenses, benefits or payments that need to be returned to employees or if the benefits in kind have been already taxed through the payroll system.
When does a P11D form need to be filed?
Tax years run from 6 April to 5 April the following year. As mentioned previously, employers must fill out P11D forms for the 2021-2022 tax year and provide employees with a copy by 6 July 2022. This is also the deadline for declaring the amount of Class 1A National Insurance owed to HMRC for benefits and expenses.
Other vital deadlines to be aware of:
- Class 1A National Insurance payments on benefits and expenses must reach HMRC by 22 July (19 July if paid by cheque).
- PAYE Settlement Agreements must reach HMRC by 22 October (19 October if paid by cheque).
- PAYE tax or Class 1 National Insurance owed on benefits and expenses must be paid monthly through payroll.
As a company, you will get a penalty of £100 per 50 employees for each month that the P11D form is late. Additionally, penalties and interest will be charged if you are late in paying HMRC, so filling out your forms and paying the tax owed in good time is crucial.
Below are some additional questions that are frequently asked.
Is there an alternative to filling out P11D forms?
There is an alternative method of handling benefits in kind: a "Payrolling Benefits in Kind" system. If you are a company intending on payrolling benefits and expenses, you will need to register them with HMRC before the start of the next tax year. If you miss this deadline, you will have to wait until the following year to register taxable benefits.
If you decide to payroll benefits in kind, you will not be required to fill out and submit a P11D form. As a result of payrolling benefits, employees included will receive an amended tax code.
You must also notify employees that you are payrolling benefits by email, letter, or payslip by 1 June after the tax year has ended. In the notification, you should include:
- Descriptions of the benefits that have been payrolled, including the value or cash equivalent amount. Additionally, which benefits are subject to tax through PAYE.
- Details of benefits in kind that you have not registered to be payrolled.
- Notice that their PAYE tax code will change.
- Notice that they will pay tax on the adjusted amount that is put through payroll monthly.
Am I due a form P11D tax rebate?
If you are an employee, you could be due a P11D tax rebate if the tax code on your PAYE account is incorrect. There are several reasons why you may have the wrong tax code, for example:
- If you no longer receive benefits from your company but still have expenses in your tax code.
- Your employer has added the wrong tax code for your salary.
- Your company benefits have been reduced but your tax code has not been amended.
If you think you have paid the wrong amount of tax, you can complete a tax rebate claim which will be assessed on an individual basis.
What happens if a P11D form is filled incorrectly?
If you have filled out a P11D form incorrectly as an employer, you may face penalties — this can be 30%, 70% or 100% of the tax you owe. This is only if HMRC believes that you have intentionally misled them, filled out the form carelessly, or deliberately tried to conceal the benefits you are liable to pay taxes on.
It is your responsibility as an employer to submit the correct details and declare the right amount of tax that you owe. If you need to amend a P11D form, you will need to include all benefits in kind and expenses and not just the ones needing correction. Additionally, you will need to submit a paper version of the form, regardless of whether you submitted the previous one online.