Understanding Company Benefits and Your P11D

When you receive benefits from your employer — such as a company car, private medical insurance, or an interest-free loan — you usually need to pay Income Tax on them. Your employer reports these benefits to HMRC, and the tax you owe is normally collected through your wages via PAYE (Pay As You Earn), affecting your take-home pay.

What are company benefits?

Company benefits (also called 'benefits in kind') are perks or advantages your employer provides beyond your salary. Common examples include company cars, private medical insurance, living accommodation, and interest-free or low-interest loans.

You pay tax on the value of these benefits to you. Your employer works out this value and reports it to HMRC. The tax you owe depends on what benefits you receive and how much they're worth.

Which benefits are taxable?

Company cars

You'll pay tax if you or your family use a company car for private journeys, including commuting to work. The taxable value depends on:

• How much the car would cost to buy
• The type of fuel it uses
• Its CO2 emissions

The value is reduced if you only have the car part-time, pay something towards its cost, or it has low CO2 emissions.

If your employer also pays for fuel you use for personal journeys, you'll pay tax on this separately.

For plug-in hybrid cars, the value is based on how far the car can travel on electric power before needing charging (its 'electric range') and its CO2 emission figure. Special rules apply to plug-in hybrids registered between 1 January 2025 and 5 April 2028 with CO2 emissions of 51g/km or more — the value may be based on 1g/km if the car has an electric range of at least 1 mile and doesn't show Euro 6d-ISC-FCM or Euro 6e status on the registration certificate.

Medical insurance

You usually pay tax on the cost of insurance premiums if your employer pays for your private medical insurance. However, some health benefits are tax-free, including medical insurance while working abroad and annual check-ups.

Loans

You'll pay tax on interest-free or low-interest loans from your employer if they're worth more than £10,000. You pay tax on the difference between the interest rate you actually pay and the official rate set by the Bank of England. This can also apply if your employer lends money to one of your relatives.

Living accommodation

If you or one of your relatives lives in accommodation provided by your employer, you may pay tax. How the tax is calculated depends on whether the accommodation cost more than £75,000. You may not pay tax if you need the accommodation to do your job properly — for example, agricultural workers living on farms.

Which benefits are tax-free?

Some company benefits are not taxable, including:

• Meals in a staff canteen
• Hot drinks and water at work
• A mobile phone
• Workplace parking
• Christmas parties costing £150 or less per head that are open to all employees
• Childcare support (including childcare vouchers)

Understanding your P11D form

Your employer might submit a P11D form to HMRC if you receive benefits in kind. This form tells HMRC what benefits you've received and their value.

However, if your employer takes the tax you owe on benefits directly out of your pay (a process called 'payrolling'), they won't need to submit a P11D. Your employer should write to you to explain if they're doing this.

At the end of each tax year, your employer should give you details of the company benefits they've reported to HMRC. This might be a copy of your P11D form if one was sent. You must keep these details for 2 years after the tax year they relate to.

If you need your P11D details, ask your employer for a record of what they reported, including how much each benefit is worth.

How benefits affect your tax code and tax bill

Company benefits reduce your tax-free Personal Allowance. When you start receiving a benefit or its value increases, you'll pay more tax and your take-home pay will reduce. When you stop receiving a benefit or its value decreases, you'll pay less tax and your take-home pay will increase.

Your employer normally collects the tax you owe on benefits through PAYE, deducting it from your wages alongside your usual Income Tax.

Checking and updating your benefit details

You can check your company benefits online using HMRC's online services or the HMRC app. This lets you see:

• All your company benefits shown in your PAYE Income Tax summary
• The value of each benefit in your tax-free amount calculation

To use the online service, sign in to HMRC online services, go to the PAYE section, select 'check current tax year' to view your PAYE Income Tax Summary for 6 April to 5 April, then select 'view or update company benefits'.

To use the HMRC app, download it, go to the PAYE section, and select 'what is a tax-free amount?'.

If your details are wrong or missing, you can use either the online service or app to add a missing benefit, update the amount, or tell HMRC the start and end dates.

For company cars specifically, you should tell HMRC if your car or fuel details change — for example, if you get a company car, give one back, or your employer starts or stops paying for fuel for personal use.

Keeping your tax code up to date helps ensure you pay the correct amount of tax, making it less likely you'll pay too much or too little.

After you update your details

Not all changes you report will affect your tax code. If your tax code does change, HMRC will tell your employer or pension provider. Your next payslip should show your new tax code and any adjustments if you were paying the wrong amount of tax.

When you sign up for paperless updates, you'll receive a message if your tax code changes. You can view these in the messages section of your HMRC online account or the communication section of the HMRC app.

What about National Insurance?

You don't usually pay National Insurance on benefits you receive from your job — your employer pays National Insurance contributions on them instead.

However, you do pay National Insurance on things paid in cash, as they're treated as earnings. For example, if your employer gives you a gift you could sell rather than keep, you'll pay National Insurance on its value.

Your reporting responsibilities

You must tell HMRC about any benefits you or your family start or stop receiving from work — even if your employer has already taken Income Tax and National Insurance for them. For company cars specifically, you should only tell HMRC once you've actually started using the car.

Sources

• Tell HMRC about a change to your company benefits
• Your P45, P60 and P11D form
• Tax on company benefits

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.