Benefits received by an employee are usually included on a form P11D, which is completed by the employer. This is completed and submitted to HMRC as it holds the details of any tax which needs to be paid. Employees may also be in receipt of non-taxable benefits, but these don’t have to be included. It’s also not necessary to include these on a self assessment tax return.
Generally speaking, all benefits and expenses which are received have to be reported to HMRC. The employer completes forms P11D or P9D with the relevant details, while a taxpayer who completes a self assessment form will just have to include the benefits received. However, an expense which was incurred “wholly, exclusively and necessarily” won’t be liable to income tax and National Insurance.
If tax is deducted, it is possible to make a Section 336 claim through the S336 Income Tax (Earnings and Pensions) Act 2003. Rather than each employee in a company making this claim, it is possible for the employer to apply for a dispensation. If this is allowed by HMRC, the employer doesn’t have to include details through PAYE and the employee doesn’t have any need to declare them in the self assessment tax return.
Travel and subsistence
Travel and subsistence is the most common type of benefit. To remain non-taxable, the travel must be necessary for business – this could involve journeys to and from a temporary workplace.
Other types of non-taxable benefits
In addition to salary, an employer may provide other benefits which aren’t taxable and don’t have to be declared. If you are unsure whether to declare a benefit, check with HMRC or your accountant. Any equipment on the premises of your employer is non-taxable as long as it is being used in the course of your duties.
Work equipment which is used in your home for official duties will remain non-taxable, although tax will be paid for private use. Many employers provide health checks and screening for employees, and these processes are non-taxable, although only one is permitted per year. Childcare vouchers are another popular benefit and are non-taxable up to a specified amount.
Non-taxable employee benefits are often given by employers in addition to salary and aren’t subject to the usual regulations. There are strict rules governing non-taxable benefits and if you are unsure of anything, you may want to seek professional advice.
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