Employee expenses and benefits: Reporting requirements

14 Feb 2025 | Tax, VAT

Offering employee expenses and benefits is a good idea for rewarding strong performance and keeping motivations high. Of course, you must accurately report your taxable benefits and expenses to avoid penalties while ensuring your employees receive the correct entitlements.

In this blog post, we outline the key reporting obligations, common errors and practical tips for accurate reporting. From P11D forms to how to overcome common mistakes, we’ll let you know what you absolutely must do.

P11D forms and when to use them

If you pay expenses and benefits through payroll software (they are ‘payrolled’), you do not need to report them to HMRC. You still must report the Class 1A national insurance you owe by submitting an online form called a P11D(b), though.

However, if you do not pay expenses and benefits through payroll, you must fill in an online form called P11D and submit it to HMRC at the end of the tax year. Again, you must submit P11D(b) for any Class 1A national insurance you owe.

If you have fewer than 500 employees, you can fill in and submit the forms through HMRC’s PAYE online service. If you have more employees than 500, you can fill in and submit the forms using payroll software.

Taxable vs non-taxable benefits

Not all benefits and expenses are taxable. Employers must therefore distinguish between taxable and non-taxable benefits to ensure they correctly report them.

Taxable benefits (must be reported on P11D) include:

  • company cars and fuel
  • private medical insurance
  • interest-free loans over £10,000
  • non-business travel and entertainment expenses.

Non-taxable benefits (exempt from reporting) include:

  • employer contributions to registered pension schemes
  • work-related training
  • business-related travel and subsistence costs
  • employee mobile phones (one per employee, if arranged through the employer).

There are a lot more taxable and non-taxable benefits and expenses than the ones we’ve listed, so make sure to check the status of your precise costs.

Key deadlines

When it comes to P11D and P11D(b) forms, employers must meet the following reporting deadlines.

  • 6 July: Submission deadline for P11D and P11D(b) forms for the previous tax year.
  • 19 July: Deadline for paying Class 1A national insurance contributions (NICs) (or 22 July if paying electronically).

Failing to meet these deadlines or submitting inaccurate information can result in penalties. It’s therefore important to ensure your forms are completed ahead of time and the information is double-checked.

  • Late P11D submission: Initial fine of £100 per 50 employees for each month late.
  • Incorrect or misleading information: HMRC may impose fines based on the severity of the error.
  • Late payment of Class 1A NICs: Interest charges and additional penalties apply.

Practical tips for accurate reporting

To avoid making mistakes, like missing an exemption or incorrectly calculating the value of expenses, you can follow some best practices for accurate expenses and benefits reporting.

  • Maintain detailed records: Keep all receipts, mileage logs, benefit agreements and other relevant documents to support tax submissions.
  • Regularly review HMRC guidelines: Tax rules can frequently change, so make sure to stay informed of any changes to avoid any issues with compliance.
  • Use payroll software: Many accounting systems can automate benefit calculations and integrate with HMRC for direct reporting.
  • Hire outside help: If you need assistance with reporting employee benefits and expenses, look for help from an accountant. They’ll teach you everything you need to know and help you with your reporting duties.

 

The last word

Staying on top of your reporting obligations is essential if you want to keep your employees motivated and protect your business from unnecessary penalties. As we’ve discussed, whether you’re dealing with payrolled or non-payrolled benefits, the key is to understand which costs need reporting, submit the right forms on time and maintain clear records. By following best practices – like keeping detailed documentation, using reliable payroll software and seeking expert guidance when needed – you’ll ensure you remain compliant and continue rewarding your team effectively. If you need further support, don’t hesitate to reach out.

Don’t hesitate to get in touch with us for help with your employee expenses and benefits.