Every year around June and July, accountants, payroll providers and business owners start talking about P11Ds.
For many business owners, they seem to appear out of nowhere. One minute you’re happily running your business, the next you’re being asked whether you’ve provided a company car, private medical insurance or fuel to an employee (or to yourself, as a director of your own Limited Company) and whether a P11D needs filing.
If you’re a sole trader reading this, don’t panic. P11Ds mainly affect employers and limited company directors. Most sole traders will never need to submit one for themselves.
Let’s break it down.
What is a P11D?
A P11D is a form submitted to HMRC that reports certain benefits and expenses provided to employees and directors that haven’t already been taxed through payroll.
Think of it as HMRC’s way of making sure tax is paid on perks and benefits received through employment.
If an employee receives something of value from the business that isn’t included in their salary, HMRC usually wants to know about it.
Common examples include:
- Private medical insurance
- Company cars
- Company-funded fuel for personal use
- Interest-free or low-interest loans
- Living accommodation
- Assets transferred to employees
- Certain subscriptions and memberships
- Some expenses paid on behalf of employees
The value of these benefits is reported to HMRC so that the correct amount of tax can be collected.
Do Sole Traders Need to Complete P11Ds?
Usually, no.
This is because a sole trader and the business are legally the same person.
Unlike a limited company director, a sole trader cannot provide taxable benefits to themselves because there is no separate employer and employee relationship.
For example, if a sole trader pays for:
- A business mobile phone
- A laptop
- Business mileage
- Use of home as office costs
these are generally dealt with through the accounts and Self Assessment tax return rather than through a P11D.
What if a Sole Trader Employs Staff?
This is where things change.
A sole trader may not need a P11D personally, but they may still need to complete P11Ds for employees if taxable benefits are provided.
For example, if a sole trader pays for an employee’s:
- Private medical insurance
- Company car
- Private fuel
a P11D may be required for that employee.
Who Typically Needs to Worry About P11Ds?
At CBC, the people we most commonly see affected are:
Limited Company Directors
Especially where the company pays for:
- Private medical insurance
- Company cars
- Any benefits that are not processed through payroll
Employers
Businesses providing benefits to employees often have P11D obligations, even if they only have a small team.
The Most Common CBC Example
One of the most common P11Ds we deal with is private medical insurance.
Let’s say your company pays:
Annual medical insurance premium: £1,200
You don’t receive that money directly, but HMRC views it as a benefit you’ve received because your employer has paid a personal expense on your behalf.
As a result:
- The benefit is reported to HMRC.
- The director or employee pays tax on the value of the benefit.
- The employer may pay Class 1A National Insurance.
What Happens After a P11D is Filed?
If you’re a director of a limited company, it’s important to understand that a P11D can create two separate tax charges.
Firstly, You May Pay Personally
The benefit reported on your P11D is treated as taxable income.
HMRC will usually collect the tax either:
- through your Self Assessment tax return, or
- by adjusting your PAYE tax code.
For example, if your company pays for private medical insurance, HMRC will generally expect you personally to pay income tax on the value of that benefit.
Secondly, Your Limited Company Has To Pay Tax Too
Many directors are surprised to discover there’s often a tax bill for the company as well.
The company will have to pay Class 1A National Insurance Contributions (NIC) on the value of the benefits provided.
This is reported on a separate form called a P11D(b) and is a liability of the company, not you personally.
A Simple Example
Let’s say your company pays:
- £1,500 for your private medical insurance
The result may be:
- You personally pay income tax on the £1,500 benefit.
- Your company pays Class 1A National Insurance on the £1,500 benefit.
From 6 April 2025, the rate of Class 1A National Insurance increased to 15%, so the company’s NIC bill on a £1,500 benefit would be:
£1,500 × 15% = £225
So, in this example:
- You receive £1,500 of private medical insurance.
- You pay income tax on the £1,500 benefit.
- Your company pays an additional £225 of Class 1A NIC.
So while the company may have paid for the insurance, HMRC still wants a share of the value from both the company and the individual receiving the benefit.
The Important Point
Many directors assume that because the company paid for something, there are no further tax consequences.
Unfortunately, that’s not always the case.
This is why it’s important to tell your accountant whenever the company starts paying for something new, such as:
- Private medical insurance
- A company car
- Personal fuel
- Gym memberships
- Interest-free loans
- Other personal benefits
A quick conversation before the company starts paying for it can often prevent surprises later.
What is a P11D(b)?
This catches out a lot of employers.
A P11D reports the benefit provided to employees and directors.
A P11D(b) reports the total benefits provided and is used by HMRC to calculate the employer’s Class 1A National Insurance liability.
In simple terms:
- The employee or director pays income tax on the benefit.
- The employer pays Class 1A National Insurance.
Many businesses remember the P11Ds and forget the P11D(b).
Unfortunately, HMRC expects both.
Can Benefits Be Payrolled Instead?
Yes. Many employers now register to payroll benefits. Mandatory payrolling of most benefits is now expected to start from 6 April 2027 so that’s when we’ll start doing this for our clients too.
This means:
- Benefits are included in payroll throughout the year.
- Employees pay tax as they go.
- Fewer P11Ds are required at the year end.
For example, private medical insurance will be taxed through payroll rather than reported later on a P11D.
Key P11D Deadlines
For the tax year ending 5 April:
6 July
By 6 July you must:
- Submit P11Ds to HMRC.
- Provide copies to employees and directors.
- Submit the P11D(b).
- If forms are submitted late, HMRC can charge £100 per month penalty.
22 July
Deadline for paying Class 1A National Insurance electronically.
Miss these deadlines and HMRC may charge penalties and interest.
Common Questions We Get
“I only have one director. Do I need a P11D?”
Possibly.
It depends on whether the company has provided any taxable benefits.
“I paid for my mobile phone through the company.”
Sometimes this is exempt and sometimes it isn’t. The detail matters. See my “Limited Companies and Mobile Phones: What Can Your Company Pay For?” article for more detail on this.
“I have a company car.”
A P11D is required unless the benefit is being payrolled.
“The company pays for my health insurance.”
A P11D is required unless the benefit is being payrolled.
“What if I forget to tell my accountant?”
That’s when problems usually arise.
Most P11D issues aren’t caused by business owners doing anything wrong. They’re caused by accountants not knowing a benefit exists until after the filing deadline.
The CBC Advice
The easiest way to avoid problems is to tell us whenever your company starts paying for something new.
Examples include:
- Private medical insurance
- Company vehicles
- Gym memberships
- Interest-free loans
- Personal expenses paid by the business
- Any benefit you’re unsure about
If you’re wondering whether something creates a tax issue, ask us first.
A five-minute conversation today is far better than an unexpected tax bill, penalty or HMRC enquiry later.
We will scan your accounts for insurances and ask too. And, generally, we will know if your accounts include a company car! So we are here doing our bit too 🙂
And remember, if you’re a sole trader with no employees, P11Ds are unlikely to be something you need to worry about. They’re far more commonly an issue for employers and limited company directors.
Caroline x
