If you give your team anything beyond salary, a company car, private medical cover, an interest-free loan, you may have a reporting job to do with HMRC. These extras are called benefits in kind, and most of them carry tax and an employer National Insurance cost.
The form that has traditionally captured them is the P11D. Miss it, and you risk penalties on top of the tax. The rules are also changing: from April 2027, most benefits will have to go through payroll instead.
This guide explains what counts as a benefit in kind, what you report on a P11D, how much Class 1A National Insurance you'll owe for 2025/26, the deadlines that matter, and how to get ready for mandatory payrolling. It's written for UK employers, owner-managed limited companies and startups running a small payroll.
What is a benefit in kind?
A benefit in kind is something of value you give an employee or director that isn't paid as cash wages. Because it still puts money's worth in their pocket, HMRC treats most of these as taxable.
Common examples include:
- Company cars and vans available for private use
- Private medical and dental insurance
- Interest-free or low-interest loans above £10,000
- Living accommodation provided by the employer
- Gym memberships, and most personal-use perks
Not everything is caught. Some items are exempt if conditions are met, for example one mobile phone per employee, or the provision of equipment an employee genuinely needs to do their job. The reportable benefit is usually the cash equivalent, which is broadly the cost to you of providing it, with special rules for cars, vans and accommodation.
If you're a director drawing a low salary and topping up with dividends through your own company, benefits in kind still apply to you. That catches a lot of people who run limited companies and assume the rules are only for big employers.
What is a P11D and who has to file one?
A P11D is the form an employer uses to tell HMRC about the taxable benefits and expenses provided to each employee or director during the tax year. You file one P11D per person who received reportable benefits.
Alongside the individual P11Ds, you file a single P11D(b). This is the employer's declaration and the form on which you calculate and report the Class 1A National Insurance due on those benefits.
You need to file if you provided benefits that weren't already taxed through payroll (more on payrolling below) and weren't covered by an exemption. If every benefit you gave is exempt, or you payrolled everything, you may have nothing to file, though you might still need a P11D(b) if any Class 1A National Insurance is due.
All P11D and P11D(b) forms must be filed online. HMRC no longer accepts paper versions for these returns.
What do you report on a P11D?
You report the cash equivalent of each taxable benefit. The figure depends on the type of benefit:
| Benefit | What you report |
|---|---|
| Company car | A percentage of the car's list price, set by its CO2 emissions |
| Van (private use) | A fixed annual benefit charge |
| Private medical insurance | The premium you paid for that employee |
| Beneficial loan over £10,000 | The interest saved versus HMRC's official rate |
| Living accommodation | The annual value, plus an extra charge on more expensive properties |
| Other perks | Usually the cost to you of providing the benefit |
Business expenses you reimburse, like genuine travel and subsistence, generally don't go on a P11D because of the exemption for paid or reimbursed expenses. Keep clean records so you can tell a reportable benefit apart from a reimbursed business cost. Tidy bookkeeping through the year makes the July return far less painful.
How much tax and National Insurance do benefits cost?
Benefits in kind are taxed twice over, once on the employee and once on you.
The employee pays Income Tax on the cash equivalent. They don't pay employee National Insurance on most benefits. The tax is usually collected through an adjustment to their tax code, or through payroll if you payroll the benefit.
The employer pays Class 1A National Insurance on the total taxable value. For 2025/26 the Class 1A rate is 15%, matching the employer's secondary Class 1 rate (gov.uk).
So a benefit that costs you, say, £1,000 to provide also costs you £150 in Class 1A National Insurance for 2025/26. That's a real number to factor into any benefits package, and it's a corporation tax-deductible cost for the company. If you want to model the National Insurance side across your payroll, our National Insurance calculator is a quick way to sanity-check the figures.
What are the P11D deadlines for 2025/26?
The reporting and payment dates run through July following the end of the tax year. For benefits provided in 2025/26 (the year ended 5 April 2026):
| Task | Deadline |
|---|---|
| File P11D and P11D(b) online | 6 July 2026 |
| Give employees a copy of their P11D information | 6 July 2026 |
| Pay Class 1A National Insurance (electronic) | 22 July 2026 |
| Pay Class 1A National Insurance (post, by cheque) | 19 July 2026 |
The filing deadline is 6 July following the tax year, and you must also give each employee a copy of the information you reported about them by the same date (gov.uk). Class 1A National Insurance is due by 22 July if you pay electronically, or 19 July if you pay by post (gov.uk).
Miss the filing date and HMRC can charge penalties; pay the Class 1A late and interest runs from the due date. Diary these now, because July arrives faster than you think.
Illustrative example: the cost of a benefits package
Illustrative example. Maya is a director of a small marketing company. In 2025/26 the company provides her with private medical insurance costing £900 and a gym membership costing £600. Neither is payrolled, so both go on her P11D.
The total cash equivalent is £900 + £600 = £1,500.
Class 1A National Insurance for the company, at the 2025/26 rate of 15%:
£1,500 x 15% = £225.
Maya is a higher-rate taxpayer, with total income in the £50,271 to £125,140 band, so she pays Income Tax at 40% on the £1,500 benefit (gov.uk):
£1,500 x 40% = £600.
So a package the company thinks of as costing £1,500 actually costs the company £1,725 once Class 1A is added, and reduces Maya's net position by £600 in tax. The company's £1,725 outlay is deductible for corporation tax, but the National Insurance is still a genuine cash cost. Knowing this upfront helps you price perks properly rather than being surprised by the July bill.
What is payrolling benefits, and what changes in April 2027?
Payrolling benefits means putting the taxable value of a benefit through your payroll each pay period, so the employee pays the Income Tax in real time alongside their salary. Do this and you don't file a P11D for that benefit, though you still report and pay the Class 1A National Insurance separately.
This is currently optional, and you register with HMRC before the start of the tax year you want to payroll for.
The big change: from April 2027, payrolling most benefits in kind becomes mandatory. HMRC confirmed in April 2025 that real-time reporting of benefits will take effect from April 2027, having originally been planned for 2026. From that date, employers will be required to report and pay both Income Tax and Class 1A National Insurance on benefits in kind in real time, rather than via the annual P11D (gov.uk).
Two benefits get a temporary exception. Employment-related loans and living accommodation can still be reported on the P11D and P11D(b) for now, with voluntary payrolling of those two available from April 2027 (gov.uk).
In practice, the last "normal" P11D round for most benefits will be for the 2026/27 tax year, filed by 6 July 2027. Treat the two filings ahead, July 2026 and July 2027, as your runway to get systems ready.
How should employers prepare? A short decision guide
You don't need to wait until 2027 to act. Work through these steps:
- List every benefit you provide. Cars, insurance, loans, accommodation, perks. If you're not sure whether something is reportable, check the gov.uk expenses and benefits A to Z or ask us.
- Check what's exempt. Don't over-report. A single work mobile or genuinely reimbursed business travel usually isn't a P11D item.
- Decide whether to start payrolling now. Voluntary payrolling smooths the move to the 2027 rules and ends the annual P11D scramble for those benefits. You must register before the tax year starts.
- Confirm your payroll software is ready. Real-time benefit reporting needs software that can handle it. Most modern packages either already do or will before April 2027.
- Budget for the Class 1A cost. Build the 15% (for 2025/26) into the true cost of any perk before you offer it.
Starting early is especially worthwhile for startups scaling their headcount, where a benefits package can grow quickly and the admin can sneak up on you.
Need a hand before the 6 July deadline? Zmartly handles P11D filing, Class 1A calculations and the move to payrolled benefits for owner-managed companies. Book a free 20-minute call with a Zmartly accountant and we'll get your benefits reporting sorted and ready for April 2027.
Frequently asked questions
Do I still need to file a P11D if I payroll my benefits?
If you payroll a benefit, you don't file a P11D for that benefit. But you still report and pay the Class 1A National Insurance on it, and you may still need a P11D(b). Any benefit you don't payroll still needs a P11D.
What happens if I miss the P11D deadline?
HMRC can charge penalties for late filing, and interest runs on any Class 1A National Insurance paid after the due date. The filing deadline is 6 July following the tax year, with Class 1A due by 22 July if paid electronically. File and pay on time to avoid both.
Are directors caught by benefits in kind rules?
Yes. Directors of their own limited companies are employees for these rules. Company cars, private medical cover and beneficial loans all need reporting, even in a one-person company. It's a common blind spot for owner-managed businesses.
Is mandatory payrolling definitely happening in April 2027?
HMRC confirmed in April 2025 that mandatory real-time reporting of most benefits in kind takes effect from April 2027. Employment-related loans and living accommodation keep an interim P11D option. We'll update clients if HMRC changes the timetable.
How much is Class 1A National Insurance on benefits?
For 2025/26 the Class 1A rate is 15% of the total taxable value of the benefits you provide. So £2,000 of benefits costs the employer £300 in Class 1A National Insurance.
