P11D & Salary Sacrificing a Car
A P11D is an annual form HMRC needs from employers for every staff member who receives taxable benefits or expenses, like company cars or interest-free loans. This guide will help you understand P11Ds, how they work and how they relate to electric car salary sacrifice schemes.
What Is A P11D Value?
The numbers on the P11D form help HMRC verify whether the employee has paid the correct amount of tax. They also assist in adjusting an individual’s tax code for the following year, ensuring that tax deductions are more accurate.
When an employee leases a company car, they must pay Benefit in Kind Tax (BiK), also known as company car tax. The BiK percentage depends on three factors: the level of CO2 emissions produced by the car, the P11D value (the on-road price of the car), and the employee’s tax bracket.
Currently, electric cars and efficient plug-in hybrids attract drivers because of their significantly lower BiK rates. Through The Electric Car Scheme, we offer the benefit of a brand-new electric car at a substantial discount.
To determine how much BiK you should pay, do the following calculation:
P11D value of the car x BiK rate x your personal income tax bracket = BiK tax owed.
Understanding The P11D Form
The P11D form layout typically includes sections for personal details, various benefit categories, and their corresponding values.
What Is A P11D Form Used For?
As mentioned earlier, the P11D form is a document used in the UK by employers to report taxable benefits and expenses provided to employees and directors. Employees who receive taxable benefits or expenses during a tax year might get given a P11D form by their employer. This form outlines the specific benefits received and their respective cash equivalent value, which is used to calculate the individual tax liability on these benefits.
The layout typically includes sections for personal details, various benefit categories, and their corresponding values.
The primary purpose of the P11D form is to ensure that employees pay the correct amount of tax on the benefits they receive from their employment.
This holds significance when you're leasing an electric car through a salary sacrifice scheme, like The Electric Car Scheme because it's an additional benefit separate from or in addition to your gross salary.
P11D Filing Deadlines
Employers must report expenses and benefits using the P11D form to HMRC by the 6th of July. Employers also need to provide their employees with a copy of this information and report the total Class 1A National Insurance owed by the same deadline.
Is There An Alternative To Filing P11Ds?
There are a couple of alternatives to filing P11Ds, depending on your position:
PAYE Settlement Agreement: If your employer pays for certain benefits on your behalf, they might consider using a PAYE Settlement Agreement. This allows employers to pay the tax on certain benefits without needing to report them on a P11D.
Using PAYE For Benefits: Some benefits can be taxed through the PAYE system, meaning they don’t need to be reported on a P11D. This is typically used for minor benefits or for those with a low value.
Opting For Cash Benefits: Instead of providing non-cash benefits that would need reporting on a P11D, employers may choose to offer cash bonuses or salary increases.
If you’re an employer and are intending to payroll benefits and expenses, you must register them using HRMC using the relevant online service. It’s important to note, this must be completed before the start of the tax year.
You Can Payroll The Following Benefits:
Employers can payroll all employee benefits apart from:
Employer-provided living accommodation,
Interest-free and low-interest loans.
The Benefits Covered In The P11D?
The following benefits are included in a P11D:
Company cards and rail season tickets,
Health insurance,
Entertainment and travel expenses,
Payments for work use of mobile,
Childcare costs,
Vehicle salary sacrifice
If you’re an employer and need to work out the cash equivalent of providing a car and a fuel benefit to an employee you will need to use P11D WS2 and P11D WS2b.
What Are The Penalties?
You may have to pay a penalty if you carelessly or deliberately submit inaccurate information in the tax return that results in you:
Not paying enough tax,
Over-claiming tax reliefs.
What Is The P11D Value For EVs?
The P11D value of a car is the official price used for tax purposes in the UK, encompassing the vehicle’s base price and any extras, but excluding Vehicle Excise Duty (VED) and the registration fee. This value determines the tax an employee pays for personal use of a company car; the higher the P11D value, the greater the tax liability.
In the Autumn 2023 Budget, Chancellor Jeremy Hunt announced that taxes on electric cars will gradually increase by 1% each year starting in 2025, rather than jumping from 2% to 5%. In contrast, high-polluting petrol and diesel cars could incur taxes of up to 37%. As a result, electric car drivers can enjoy significant tax savings, while petrol and diesel vehicles remain more costly due to higher taxes and running expenses. The Electric Car Scheme simplifies the BiK calculation, so employees and employers don’t need to worry about it. We’ve broken down how this works for some popular cars available through the scheme.
At The Electric Car Scheme, we help employees unlock government tax incentives and save 30-60% on any electric car. To participate, you simply agree to have a portion of your pre-tax salary deducted each month to cover the car’s cost. You can choose the car you want, add any extras, and drive away while saving thousands of pounds.
Employees opting for an electric car through salary sacrifice benefit in two key ways.
First, the lower tax rates on electric vehicles result in reduced BiK taxes, decreasing tax liabilities based on the car’s value and offering substantial savings compared to traditional petrol or diesel vehicles.
Second, the overall cost of leasing becomes more affordable due to these reduced tax rates. With lower BiK taxes, the taxable value of the car decreases, leading to more manageable monthly lease payments. This makes choosing an electric car a more financially viable option for employees participating in salary sacrifice schemes.
If you decide to use The Electric Car Scheme to lease a BMW i4 Gran Coupe, you'll pay £556 each month - you will save £341 in Income Tax savings and £17 in National Insurance contributions. However, employees will need to pay £61 of Benefit-in-Kind tax.
If you choose to salary sacrifice the Skoda Enyaq Coupe, your monthly cost will be £488 compared to £747 without National Insurance and Income Tax savings. Leasing an electric car has great environmental benefits and will save the driver money in the long term. You can visit The Electric Car Scheme’s quote tool to calculate your savings.
How P11Ds Work With The Electric Car Scheme
After enrolling your business in the scheme, we will annually furnish draft pre-filled P11D forms for your submission to HMRC. These forms are completed for the tax year's conclusion, incorporating Benefit in Kind (BiK) details in both the employee's and the company's P11D submissions. We aim to streamline the process, ensuring simplicity and convenience for both businesses and employees. From an administrative perspective, this service reduces the burden of form preparation and submission for employers. Employees also benefit from a hassle-free process, minimising their involvement in filling out complex tax forms.
Switching to an electric car is one of the most significant ways to make a positive change towards net zero. At The Electric Car Scheme, we want to make it cheaper and easier than any other option. Salary sacrifice makes this possible, allowing employees to save 30-60% on any electric car on any electric car by reducing their salary in exchange for an electric car as a benefit. You can use our quote tool to browse the cars we have available and learn how much you can save or you can read in more detail about how the scheme works here.
Our lease pricing is based on data collected from The Electric Car Scheme quote tool. All final pricing is inclusive of VAT. All prices above are based on the following lease terms; 10,000 miles pa, 36 months, and are inclusive of Maintenance and Breakdown Cover. The Electric Car Scheme’s terms and conditions apply. All deals are subject to credit approval and availability. All deals are subject to excess mileage and damage charges. Prices are calculated based on the following tax saving assumptions; England & Wales, 40% tax rate. The above prices were calculated using a flat payment profile. The Electric Car Scheme Limited provides services for the administration of your salary sacrifice employee benefits. The Electric Car Scheme Holdings Limited is a member of the BVRLA (10608), is authorised and regulated by the FCA under FRN 968270, is an Appointed Representative of Marshall Management Services Ltd under FRN 667174, and is a credit broker and not a lender or insurance provider.
