Now that the 31st January self assessment filing deadline has passed, we are turning our attention to 5th April, and the tax year end...
Following 5th April, all businesses must submit forms P11d to HMRC (where applicable) reporting all benefits in kind given to employees for the last tax year.
What are benefits in kind?
Any benefits that an employee or director receives which are not part of the salary that goes through the payroll. These are some examples:
Health insurance - if the employer pays this on your behalf, you are in receipt of a benefit.
Cars and vans - if the employer allows you to use a vehicle privately, or pays for your private fuel, this is a benefit to the employee
Accommodation - if the employer pays towards accommodation that doesn't meet strict HMRC criteria, this is also a benefit to an employee
Car & Van Benefits
This is one of the most common benefits arising, so it is quite useful to understand it more fully:
Car benefits are calculated by reference to the list price of the vehicle, and its CO2 emissions. Therefore, a cheaper and more environmentally friendly vehicle will be more tax efficient. HMRC also penalise diesel drivers, by adding on a further 3% charge when calculating the car benefit. It may be worth considering this, if you are thinking about buying a company car. Car fuel benefits are also calculated in a similar way.
Van benefits are a little more straightforward in that there is a set value to use in calculating the benefit - £3,150 for private use of the van, and an additional £594 for private fuel, giving a total benefit of £3,744 (for 2015/16).
What tax will I pay?
Companies pay Class 1A National Insurance at a rate of 13.8% on the value of the benefit in kind. For 2015/16, this will be due for payment by 19th July 2016.
If you are an employee or director in receipt of a benefit in kind, you will pay income tax on this (at 20%/40%/45% depending on your level of income). The tax will primarily be collected at source from your earnings via an adjustment to your PAYE coding notice.
What deadlines do I need to be aware of?
The filing deadline for 2015/16 P11ds is 6th July 2016, to avoid a £100 (minimum) penalty. However, if you are a client of ours and we are aware that you need to file P11ds, we will be contacting you shortly after 5th April to ensure that we can prepare and submit your forms, and also advise you of your resulting National Insurance liability, in a timely manner.
As you can appreciate, as with all aspects of tax, this is a complex area, so please contact us if you would like to discuss this further.
Abbie Henshaw ACCA CTA
Accounts, Audit & Tax