The My.Drewberry platform has a new feature. Users can now see if a benefit is a Benefit-In-Kind / P11D Benefit. Learn more about P11D benefits and how they work 🤓
P11D benefits are benefits you receive in addition to your salary. For example, Private Health Insurance, interest-free season ticket loans, and company cars. These benefits have monetary value and, therefore, are subject to tax.
Your employer must submit a P11D form on your behalf each year. It reports any other benefits you receive alongside your salary.
How Does A P11D Benefit Work?
P11D is used for taxable benefits by employers to ensure you pay the correct amount of tax for your benefits. Employers must report to HMRC about the benefits their staff have received and pay tax accordingly on these benefits.
How Is A P11D Benefit Calculated?
P11D benefits are calculated based on the type of benefit. Each benefit has specific rules. For example:
- Private Health Insurance
The taxable value equals the cost an employer pays to provide this insurance to employees - Company cars
The taxable value is based on the list price of the vehicle, the CO2 emissions, and fuel type. The benefit value is a percentage of the car’s list price - Season ticket loans
If an interest-free season ticket loan exceeds £10,000 at any time during the tax year, the benefit is calculated on the rate of interest set by HMRC.
How To Calculate A P11D Benefit
To calculate the value of a P11D benefit, you will need to identify how much the benefit costs your employer annually. From there, relevant deductions are made. Some benefits may have allowable deductions or exemptions.
The taxable amount is the final value after applying any deductions. This is what is reported on the P11D form.
How Your Employer Reports P11D Benefits
P11D benefits must be reported to HMRC using a P11D form. Employers must file a P11D form for each employee receiving any benefits in kind, as well as a P11D(b) form to summarise the Class 1A National Insurance contributions payable.
Here’s how reporting P11D works:
- Employers must identify benefits and expenses that need to be reported
- The employer fills in a P11D form, detailing your benefits
- The completed form is submitted to HMRC, alongside the P11D(b) form
- The reported benefits are then added to your taxable income.
Important information: Employers must submit completed P11D forms by July 6th each year, following the tax year in question.
How Does P11D Impact Employee Pay?
Once HMRC receives a completed P11D form for your benefits, HMRC will collect tax on these benefits accordingly. Normally, this is carried out by HMRC adjusting your PAYE code to deduct payable tax.
This change means that your tax-free allowance is reduced, and as a result, you pay a higher amount of tax in your PAYE deductions.
P11D Cost Example
If an employer pays £1,200 per annum for your Private Health Insurance, the taxable benefit amount is simple.
The annual cost is £1,200. This is added to your taxable income for the year. You are then taxed on this amount according to your Income Tax rate.