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Business Services  •  Business Tax  •  Personal tax

P11Ds are changing; avoid the double tax trap for employees

By RJP LLP on 16 May 2024

If you work in payroll, you will appreciate that there is always one deadline or another to comply with. One of the most significant is the P11D deadline on 6 July, when details of all benefits in kind received by employees needs to be submitted to HMRC. In addition to the main P11D form, a P11D(b) needs to be submitted too. This records the class 1A national insurance contributions (NICs) that are due from the employer. Class 1A NICs should be paid in full by 22 July if you are set up to pay electronically, or by 19 July if you still pay by cheque.

On 6 April 2023, new rules came into operation requiring that P11Ds are submitted online only. Any employers wishing to continue with paper forms require special dispensation.

Further changes are due from 6 April 2026, when keeping a payroll record of all benefits in kind (BiKs) will become mandatory.

P11D changes could create extra admin

Currently some benefits cannot be processed through the payroll system and a separate P11D needs to be submitted to account for these even when other benefits for the same employee are accounted for via the payroll. This can mean extra work in administering two separate processes for the same employee.

Benefits that require ‘off-payroll’ recording

Some benefits offered to employees can’t be included in the payroll in real-time and these need to be included in a P11D. For example:

  • living accommodation that is provided by an employer;
  • beneficial loans provided interest-free or at a low rate of interest.

Will P11D changes bring cashflow implications?

The change requiring electronic submission of P11D forms will mean that any tax due will be payable in real time, because the tax codes for the employee can be generated in real time. This could cause issues for some employees who will need to pay any additional tax due on an ongoing basis rather than being able to declare the benefits in one tax year and then pay any tax due in the following tax year.

If you are an employer and have employees receiving these benefits, they will need time to plan for this in advance. One option could be to transition to the new system early, giving employees time to adjust to the changes.

Potential for double taxation of benefits

In some situations, employees could be issued with a tax code that reflects the benefits they had enjoyed in the previous tax year, while at the same time paying for benefits they are currently receiving in real time through the payroll.

This will mean employees having double taxation during the transition year. And they may need support through this period.

If you would like help to manage the transition to digital P11D reporting or wish to discuss tax advantaged employee benefits and employee share schemes, please contact us via partners@rjp.co.uk.

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