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The way benefits are taxed is changing and the value of your taxed benefits will soon begin to appear on your payslip.
The current process
At the end of each tax year, your employer sends a declaration to HMRC called a P11d. This details the benefits provided to you throughout the tax year. HMRC then adjust your tax code to collect the tax due throughout the following year.
What is classed as a “Benefit” and do all “benefits” have to be declared?
Typically a benefit is something you benefit from which doesn’t relate to the company business, or only partly relates to the company business. For example:
- A gym membership
- A health care scheme
- A company car (even if used for business)
- A company van (if taken home)
- Vehicle fuel
- Interest free loans of more than £10,000
- Rail season ticket
- Home telephone
…and more. A full list of benefits can be found here. This list will also let you know what is exempt.
“Benefits” provided also extend to your:
- Spouse/civil partner
- Guests
- Dependants
- Servants
- Parents
- Children
- Children’s spouse/civil partner.
Any benefits paid to the above must also be declared. You will pay the tax and your employer will pay the national insurance on the benefit.
What’s changing?
Rather than your employer sending a P11d at the end of the tax year, the value of the benefit will, instead, be shown on your payslip.
You won’t receive more money in your bank, but you’ll be able to see the value of the benefit and the effect on the tax you pay.
There are advantages to using this system:-
- Your tax code will no longer be adjusted to account for tax due on benefits provided in the previous year.
- Tax is calculated in real time and is based on your salary, any commissions and bonuses, any deductions, and any benefits received. If, for example, your health care cover increases in September, this will be shown on your payslip and your tax adjusted in September.
- You will no longer receive a P11d* at the end of the tax year as all benefit information will be included in your P60.
- Adding your P11d information to your tax return (if applicable) will no longer be required.
Exceptions
*Currently, beneficial loans and living accommodation cannot be added to payslips. These benefits will continue to be reported on P11d’s.
