If you receive services or perks from your company on top of your salary, they may count as benefits in kind and be taxable. This guide explains how common benefits are taxed, what your company must report, and the mistakes directors often make.
Benefits in kind include items such as private medical insurance, company cars, beneficial loans, and certain subscriptions. You are taxed on the cash equivalent of the benefit at your normal marginal rate.
Separately, your limited company pays Class 1A National Insurance on the value of most benefits. For the 2025/26 tax year, the Class 1A and 1B rates are 15%. See HMRC’s current rates and thresholds.
How do you tell HMRC about benefits?
There are two ways to report benefits. Your company can either:
- report benefits on forms P11D and P11D(b) after the tax year and pay Class 1A NIC by the July deadline, or
- payroll benefits in real time, so tax is collected through the monthly payroll. A P11D(b) is still required to pay Class 1A.
- read the official guide to how payrolling works, and our guide to the P11D.
What is changing from April 2027?
- From 6 April 2027, it will be mandatory to payroll most benefits electronically – via RTI.
- HMRC says it will remove benefits from employees’ tax codes in readiness.
- Employers will not need to register to payroll these benefits from 2027.
- Employment related loans and living accommodation will not be mandated at first.
- You can payroll those voluntarily from April 2027 and HMRC will set a mandate date later.
- See the government note on real time reporting of benefits.
P11D and P11D(b) deadlines and online filing
- Submit P11D and P11D(b) to HMRC by 6 July after the tax year, and give employees their information by the same date.
- Pay Class 1A NIC by 22 July if paying electronically or 19 July if paying by post or cheque. See HMRC deadlines.
- P11D and P11D(b) returns must be filed online. See our P11D guide.
Is private healthcare a benefit in kind?
Contractors often ask this. The answer is yes!
If your company pays for private medical insurance, it is a taxable benefit. You pay income tax on the benefit value, and the company pays Class 1A NIC at 15% for 2025/26.
Optional Remuneration rules apply if you use salary sacrifice, so the taxable amount is usually the higher of cash foregone or the normal benefit value.
If you are deciding whether to pay for health insurance personally or through the company, read our comparison: Health Insurance Through the Company or Personally.
Common benefits in kind errors
- Putting reimbursed business expenses on P11D. Since April 2016, if the company reimburses a wholly and exclusively business expense that would be deductible, it is covered by the statutory exemption and is not normally reportable on a P11D. You must keep evidence and have a checking process. See HMRC’s guidance on the exemption for reimbursed expenses.
- Company cars with wrong details. Car and fuel benefits depend on list price, CO2 band, fuel type and availability dates. Keep the vehicle details on file and use the HMRC calculator. See reporting company cars and the car benefit calculator.
- Missing beneficial loans. If your director’s loan account is overdrawn, an interest benefit can arise. Loans under £10,000 are usually exempt. Otherwise, you must report and pay Class 1A NIC. See beneficial loans.
- Mixing up staff entertaining and client entertaining. Staff annual functions can be exempt within limits. Client entertaining is not deductible for corporation tax and is not a benefit in kind. Record these separately.
Quick look at common benefits
| Benefit | Taxable to the employee | Employer NIC | Report or payroll |
|---|---|---|---|
| Private medical insurance | Yes | Class 1A at 15% in 2025/26 | P11D or payroll the benefit, P11D(b) still due |
| Company car | Yes | Class 1A | P11D or payroll, keep CO2 and list price evidence |
| Fuel for private use | Yes if not fully repaid | Class 1A | P11D or payroll, consider excluding fuel |
| Mobile phone, one handset | Usually no | None | Exempt if provided by the employer for business and private use |
| Professional subscriptions on HMRC list | No | None | Exempt if on the approved list, keep receipts |
| Director’s beneficial loan above £10,000 | Yes | Class 1A | P11D today, loans are not mandated for payrolling at first |
| Living accommodation | Often yes | Class 1A | P11D rules apply, special valuation rules |
| Reimbursed business expenses that qualify | No | None | Covered by the exemption if fully deductible |
What your company should do next
Your accountant will handle most of this, but as a director, you are ultimately responsible.
- Choose your approach for 2025/26. Keep P11Ds or register to payroll benefits before the tax year starts.
- Prepare for April 2027. Most benefits will be payrolled through RTI from that date. Loans and accommodation will be voluntary at first and mandated later. See the government update.
- Diary the P11D dates. File P11D and P11D(b) by 6 July. Pay Class 1A by 22 July.
- Tighten records. Keep evidence for each benefit, apply the reimbursed expenses exemption correctly, and reconcile any payrolled benefits to the year-end Class 1A figure.
FAQs
Do I still need a P11D if we payroll benefits?
Not for the payrolled items. You still submit a P11D(b) to pay Class 1A NIC, and you still file P11Ds for any benefits that are not payrolled, such as loans and accommodation, until HMRC mandates them.
What are the exact filing and payment deadlines?
6 July to file P11D and P11D(b) and give employees their information. 22 July to pay Class 1A NIC or 19 July if paying by post.
What about reimbursed expenses?
Qualifying reimbursed business expenses are covered by the statutory exemption, so no P11D is needed if your process meets the rules. Keep evidence and operate a checking system.
Where can I check special cases?
See HMRC’s pages for company cars, beneficial loans and living accommodation.
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