Ryan Oates
Posted By Ryan Oates
04/05/2023

As we have passed the end of the 2022/2023 tax year, it’s important for employers to remember their obligation to report any employee benefits in kind that they have provided throughout the year, before 6 July 2023.  This reporting is done through the completion of a P11d form and failure to complete and submit the form to HM Revenue and Customs (HMRC) can result in penalties and fines.

Employers are required to report any benefits in kind provided to their employees that are not part of their regular salary or wages.  Examples of such benefits may include company cars, private healthcare, and interest-free loans. For Employee Benefits, the following are the most common benefits which need to be disclosed:

  • Private Medical Insurance
  • Health Cash Plans
  • Dental Plans
  • Group Critical Illness

The value of these benefits must be calculated and reported to HMRC through the P11d form.

It’s important for employers to remember that, even if they have provided benefits in kind to only a few employees, they are still required to complete and submit the P11d form. The deadline for submitting the form is 6 July, following the end of the tax year.

Completing the P11d form can be a time-consuming and complex process, especially for employers with multiple employees and a wide range of benefit offerings.  However, there are resources available to help employers navigate the process, including HMRC's guidance on completing the form and payroll software solutions that can automate the process.

Here's an example of a benefit in kind calculation for private medical insurance:

Let's say an employer provides their employee with private medical insurance as a benefit in kind.  The annual cost of the insurance is £1,500, and the employee earns a salary of £35,000 per year.

To calculate the benefit in kind for private medical insurance, the following steps need to be taken:

  1. Determine the cost of the benefit. In this case, the cost of the private medical insurance is £1,500 per year.
  2. Calculate the benefit in kind. The benefit in kind for private medical insurance is the full cost of the benefit, so in this case, the benefit in kind would be £1,500.
  3. Add the benefit in kind to the employee's taxable income. The benefit in kind of £1,500 is added to the employee's salary of £35,000, resulting in a taxable income of £36,500.
  4. Calculate the employee's tax liability. The employee's tax liability on the benefit in kind would depend on their tax bracket. Let's assume they are a basic rate taxpayer, meaning their tax rate is 20%. Therefore, their tax liability on the benefit in kind would be £300 (20% of £1,500).

The benefit in kind for private medical insurance in this example is £1,500, which would increase the employee's taxable income and result in a tax liability of £300.  This additional tax liability will often be collected through Payroll by amending the employee’s tax code (and subsequently their personal allowance reducing).

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All statements concerning the tax treatment of products and their benefits are based on our understanding of current tax law and HM Revenue & Customs practice. Levels and bases of, and reliefs from taxation are subject to change. We recommend businesses seek professional advice from an accountant.
This article is intended to provide you with information and general guidance and does not provide financial advice. If you require such advice, you should engage the services of a professional accountant.
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