P11D – Employers return of Directors/Employee’s Expenses and Benefits in Kind

It is time to prepare the Forms P11D and P11D(b) for the 2023-24 tax year. The Forms are the employer’s responsibility. They are required for directors and employees who are provided with benefits or for whom you pay or reimburse non-deductible expenses.

The Forms P11D and P11D(b) must be submitted to HMRC by 6th July 2024. The Class 1A National Insurance (NIC) liability is due for payment by 22nd July 2024 if paying electronically or 19th July 2024 if paying via cheque.

All employees must be provided with a copy of their P11D by 6th July 2024.

Penalties for late filing and payment

You’ll be charged a late filing penalty of £100 per 50 employees for each month (30 days) the Form P11D(b) is late.

You could also be charged a late payment penalty if the Class 1A NIC isn’t paid by 22nd August 2024 (30 days after the payment deadline). This is 5% of the unpaid NIC, increasing to 10% after 6 months and 15% after 12 months.

As with most other payments to HMRC, late payment will also incur interest charges. 

If HMRC feel it is necessary, they can request a penalty of £300 per P11D that is submitted late. However, this must be done through their First-tier Tax Tribunal which can also lead to £60 per day being charged until the employer brings the affairs up to date.

Some important information regarding certain benefits and expenses, and the completion of Forms P11D: 

• Regarding business expenses, there is a statutory exemption for specific payments, provided that they are not paid or reimbursed through a relevant salary sacrifice arrangement. This includes business travel and subsistence payments and professional fees and subscriptions paid or reimbursed to employees, where the payments would be an allowable deduction, i.e. the expense has been incurred “wholly, exclusively and necessarily” while doing their job. These payments will not need to be returned on Forms P11D.

• Regarding fuel available for private use on company cars, the appropriate benefit scale charge percentages have increased for 2023-24. The Fuel benefit charge (on which the emission percentage is applied) has been increased from £25,300 in 2022-23 to £27,800 in 2023-24, this rate is frozen for 2024-25.

You may wish to review the value of this benefit as it is an all or nothing charge, meaning even if as little as £1 worth of fuel paid for by the company is used for private use, the full Fuel Benefit charge will apply.

• The benefit on electric cars has remained the same at 2% for 2023-24 with an increase to 3% not expected until the 2025-26 tax year. Hybrid cars with emissions less than 50g/km have a rate of between 2% and 14% based on the amount of mileage able to be done solely on the electric charge.
• When a company car is initially provided, the employer is required to send a Form P46(car) to HMRC. At a time when cars may be purchased at discounted rates it is important to ensure that the correct manufacturers’ list price is shown, as that is used to calculate the benefit, NOT the second-hand purchase price or value of the car.
• If you reimburse employees for travel in their company cars or need employees to repay the cost of fuel used for private travel, the advisory fuel rates must be used. These rates are reviewed four times a year and any changes will take effect on 1 March, 1 June, 1 September and 1 December.  You should ensure that the correct rate is used at the time the mileage was incurred.

https://www.gov.uk/guidance/advisory-fuel-rates

• The van benefit charge was £3,600 and van fuel benefit charge was £688 in 2022-23, and has increased to £3,960 and £757 respectively in 2023-24. These rates are frozen for 2024-25.
• Loans provided by an employer with a combined outstanding value to an employee of less than £10,000 (2023-24) throughout the whole year do not need to be reported. The official rate of interest applicable to beneficial loans exceeding £10,000 has increased from 2.00% in 2022-23 to 2.25% for 2023-24 with this rate remaining the same for 2024-25.
• An employee does not have to pay tax on Trivial Benefits provided by their employer if all of the following apply:

• it cost you £50 or less to provide
• it isn’t cash or a cash voucher
• it isn’t a reward for their work or performance
• it isn’t in the terms of their contract

Payrolling benefits

From 6 April 2026, HMRC are intending to abolish the need for P11D’s by payrolling all benefits.

Payrolling benefits works by including the monthly cash equivalent of the benefit on the employee’s payslip each month so that the benefit can be assessed and tax collected in real-time.

All benefits can currently be payrolled apart from employer provided living accommodation and beneficial loans as HMRC haven’t finalised how this will be calculated.

An important point to note, in the first year of switching, the benefits will be taxed twice.

Why will this happen? With payrolled benefits, employees are taxed in real-time so if an employee had benefits in the previous tax year and the current tax year, they would have to pay tax twice. Once in real-time for the payrolled benefits, and again on those included in their PAYE tax code as these will be from the previous year.

HMRC are continuing to release guidance on how this process will work with draft legislation being confirmed to be released later this year. Employer guidance is also expected prior to 2026.

If you require any further information regarding the completion of Forms P11D, or whether certain benefits in kind are still cost effective, please speak to your Lambert Chapman LLP Partner or your usual Tax Department contact.

Alternatively, if we are not engaged to act on your behalf but you wish for us to do so, please follow the “Contact Us” link at the top of this page.