What is a P11D Form and Why is it Important for Tax Purposes?

In the UK, staying compliant with HMRC pertaining to tax obligations is crucial for businesses. One such crucial document dealing with the payable tax is the P11D form. When an employer or an employee receives benefits from their company, understanding what is a P11D form and its significance is essential for them to ensure tax efficiency and legal compliance with HMRC regulations. Therefore, in this blog, we will discuss what is a P11D form, why it is important, what information it contains, who needs to file it and when to ensure legal compliance.

Ultimately, this read is going to be worthwhile in giving you all the necessary information regarding a P11D form.

 

 

What is a P11D Form?

Speaking briefly, a P11D is a crucial document submitted to HMRC by employers to report taxable benefits given to employees. These taxable benefits are specifically the ones which have not already been covered in the payroll. Hence, with a P11D form, an employer has the opportunity to list and pay any NICs (National Insurance Contributions) and non-payrolled benefits on behalf of the employees.

Now, let’s take a deeper dive into understanding what is a P11D form.

An employer submits a P11D form to HMRC to report benefits in kind and any expenses provided to the company’s directors or employees. These benefits in kind encompass the various services or objects that a director or an employee obtains from the company apart from their salary, i.e. company vehicles (cars), private healthcare, and interest-free loans.

It is important to understand why these expenses must be reported to HMRC.

Notably, all the benefits significantly increase an employee’s salary, resulting in the payment of NICs and might not have been accounted for while processing the payroll. Since they have a monetary value associated with them, they are all subject to tax payment and must be reported to HMRC.

Moreover, similar to the other taxable income, the non-payrolled benefits are also required to be reported to HMRC annually.

Who Files a P11D Form?

It is noteworthy that the responsibility to file a P11D form rests with an employer if they give taxable benefits to employees. Similarly, the company directors shall have to file a P11D form in case they are obtaining benefits from their company. Nonetheless,  these contributions are primarily paid by the company (employer), not the employee. However, for many freelancers and contractors, being an employer and an employee means the same thing. Moreover, while the employees don’t need to submit a P11D, they must check their tax code to ensure their obtained benefits have been taxed accurately. Lastly, in order to report them, an employer completes and files an annual P11D form accurately as part of their self-assessment tax return.

It is worth highlighting that in 2024, HMRC made a significant announcement regarding P11D forms. A P11D will remain valid for 2024/25 and 2025/26. After April 2026,  all employers will have to include the benefits in the payroll instead of submitting a P11D form (online submission) each year. This step was taken to reduce the need for over 4 million P11Ds to be submitted annually.

What Taxable Benefits are Reported on a P11D Form?

Generally, any services or items an employee benefits from and which the company pays for must be included on the P11D form.

The following is the list of the major benefits and expenses that are usually reported:

• Company vehicles, such as cars and vans given for personal use and fuel expenses.
• Private health insurance expenses are needed when the employer covers private healthcare costs.
• Interest-free or low-interest loans. For instance, under HMRC guidelines, loans above £10,000 that are interest-free or have a lower interest rate than the official rate must be reported.
• Loans for rail season tickets
• Professional or private memberships. It includes any additional benefits that are not in cash, such as club, gym memberships, or other perks.
• Living accommodation. When an employer provides an employee with a house or apartment, the taxable value is included in the P11D form.
• Pecuniary bills. It includes the employer-paid expenses, like accounting fees.
• Home phones for personal use
• Shopping or hospitality vouchers
• Non-business entertainment perks such as cinema and gig tickets
• Assets that an employee receives that have significant personal use
• Company-paid self-assessment fees.
• Non-business travel expenditures.
• Non-business entertainment expenses

It is worth pointing out that if an employer chooses to include the benefits of employees in the payroll by taxing them along with employees’ pay (monthly or weekly), they shall not be required to be included on a P11D form.

How to file a P11D form with HMRC?

1. Fortunately, an employer can submit a P11D form in two ways. They can submit it online via HMRC’s PAYE system. Typically, online filing is encouraged.
2. Alternatively, they can also file the P11D form by using commercial payroll software.
3. It should be noted that HMRC has stopped accepting paper P11D filings since March 2023. Consequently, only online submissions will be entertained.
4. Further elaborating, when a company has fewer than 500 employees, they can viably fill in and submit the P11D forms online via HMRC’s PAYE online service.
5. With HMRC’s PAYE online service, an employer reports the forms P11D and P11D(b). It is an integral part of an employer’s End-of-Year responsibilities.
6. Nevertheless, if your employees’ numerical strength exceeds 500, you must submit the forms using your payroll software.
7. Ultimately, in any case whatsoever, paper forms will not be accepted.

For further information, visit the government website.

What is the Deadline for P11D?

Similar to most tax filings, where HMRC imposes the penalty straightaway if you run late in filing your tax returns, the scenario is slightly different with the deadline for submitting a P11D form.

By principle, the P11D must be filed by July 6, following the end of the tax year on April 5. Furthermore, you must also complete and return the P11D(b), which calculates employer Class 1A NIC due on certain benefits by July 22.

However, consider the scenario where you miss the deadline for filing the P11D form online. Then, you will not face penalties right away. On the contrary, you will have about a fortnight to rectify your mistake and file.

Now, if you still have not filed the form even when July 19 has come and gone, your company (rather than you personally) will now incur fines of £100 per month per 50 employees.

Moving further, if you still defer filing it even after November has approached, HMRC will now send you a reminder, in addition to the details of all the penalties you have accrued up until then.

Likewise, you must ensure that P11D is not incorrect, for HMRC will also impose penalties of 30%, 70% or 100% of the tax owed if it finds you were remiss, incorrectly filed or deliberately misled them by concealing your true liabilities.

Nonetheless, if the incorrect filing was a result of a genuine mistake, you will incur no fines.

Last but not least, it is mandatory for employers to give a copy of the P11D form to the employee by July 6. It is done so that the employees can complete their income tax returns, verify their tax deductions, claim the applicable tax reliefs,  and report if there are any discrepancies.

Why is the P11D Form Important for Tax Purposes?

The following factors elaborate on why and how the P11D form plays a crucial role in ensuring fair taxation for employees and compliance for employers:

Correct Taxation:

All the benefits employees receive are subject to tax payments since they are considered part of their income. Accordingly, the P11D helps HMRC calculate the correct Income Tax and NICs of employees.

Correct Payment of NICs:

Employers are responsible for paying Class 1A NICs on the value of taxable expenses and benefits given to employees at the end of each tax year. Notably, the Class 1A NIC rate on expenses and benefits for 2024/ 25 is 13.8%.

Thus, submitting a P11D ensures the correct payment of NICs.

Also, you can find out more about expenses and benefits for employers by going through the government website.

Compliance With HMRC Regulations:

• As discussed above, failure to file a P11D correctly or missing the deadline means non-compliance with HMRC rules, resulting in the imposition of penalties.
• By contrast, meeting the deadline and filing the P11ds on time can prevent you from facing penalties.

Employee Tax Codes and PAYE Adjustments:

It is worth emphasising that HMRC uses P11D data to adjust employee PAYE (Pay As You Earn) tax codes to ensure their tax deductions correctly reflect the benefits they have received. As an outcome, an employee does not confront underpayments or unexpected tax bills.

 

 

Conclusion

To sum up, it is compulsory for an employer to file the P11D form accurately and on time to avoid penalties and ensure smooth tax processing for both their business and employees. Additionally, an expert and proficient accountant can make all the dynamics of a P11D form a breeze for you. A certified accountant, like those at Payroll Services Accountants, can collaborate with you to set up and configure your payroll system. Our team of skilled accountants will process and manage your payroll while focusing on meeting your specific needs. This includes calculating your employees’ salaries, taxes, and National Insurance Contributions with precision. Beyond that, we will also provide you with regular payroll reports and analytics to give you insights into your payroll data.

Thus, start to get your payroll affairs in order with us by contacting us today.

Disclaimer: Please note that the information provided in this blog is exclusively for informational purposes and should not be considered financial advice. Always consult with a professional accountant to ensure compliance with UK laws and regulations.