Reporting 2024/25 benefits and expenses

Employers who provided taxable benefits and expenses to employees in the 2024/25 tax year need to meet compliance obligations in respect of those benefits. The obligations will vary depending on whether the benefits and expenses are reportable on a P11D form, whether your business qualifies for dispensation relief, or whether you’ve operated under PAYE settlement agreements (PSAs). Understanding these distinctions now will help you avoid penalties and ensure smooth administration before the 5 July 2025 reporting deadline.

What counts as a taxable benefit?

Taxable benefits are anything of monetary value provided to employees beyond their salary or wages. Common examples include company cars, fuel allowances, private medical insurance, gym memberships, and accommodation. Some benefits are exempt from tax entirely (like certain childcare vouchers or cycle to work schemes), but most are reportable and assessed as additional income.

The key principle is that if your employee could have received cash instead, HMRC will likely view it as a benefit. The value is calculated on what the employer spent, not what the employee could sell it for afterwards. For the 2024/25 tax year, it’s essential to identify all benefits provided across your workforce, calculate their cash equivalent values accurately, and determine the correct reporting route.

P11D reporting requirements

If you haven’t applied for dispensation relief (see below), you must report benefits on form P11D for any employee earning £8,500 or more per annum (including benefits). This threshold applies across your entire workforce—if one employee earns above it, their benefits must be reported.

P11D forms must be submitted to HMRC by 6 July 2025 (for the 2024/25 tax year), alongside a declaration on form P11D(b). You’ll also need to provide copies to your employees by the same date. Each form should detail:

• Company cars and fuel (with the appropriate percentage charge based on CO₂ emissions)
• Accommodation
• Loans provided
• Professional fees or subscriptions paid on behalf of the employee
• Gifts (unless genuinely one-off)
• Travel and subsistence

Getting the valuations right is crucial. For company cars, you’ll apply the appropriate percentage to the list price (not the actual cost to your business). For other benefits, you use actual cost unless specific HMRC guidance applies.

Dispensation and settlement agreements

Rather than reporting everything on P11D forms annually, you might apply for a dispensation from HMRC. This is a formal agreement stating that certain benefits provided to your employees are not taxable, or that you’ll handle the tax assessment differently. Dispensations are particularly useful if you regularly provide consistent benefits across your workforce.

If HMRC agrees, you won’t need to report those specific benefits on P11D forms. However, you’ll still need to account for tax through your payroll or via a PAYE Settlement Agreement (PSA). A PSA allows you to make a single annual payment to cover the income tax and National Insurance on benefits, rather than adjusting individual employee tax codes. This is administratively simpler for larger or more complex benefit arrangements.

To obtain or renew a dispensation, contact HMRC’s Employer Compliance team with full details of the benefits you wish to cover. It’s worth reviewing any existing dispensations now to ensure they still accurately reflect what you’re providing.

Expenses and the £5,000 exemption

Employee expenses (rather than benefits) follow different rules. If you reimburse genuine business expenses—such as travel, accommodation, or professional fees incurred in the course of employment—these are not taxable, provided the employee isn’t left out of pocket. You don’t report them on P11D.

However, if your reimbursements exceed £5,000 per employee in a tax year, the excess is potentially taxable. This threshold is rarely exceeded, but it’s worth tracking for employees who travel extensively on business.

Getting organised now

With the 5 July 2025 deadline approaching, now is the time to audit your benefit arrangements, gather valuations, and decide whether P11D reporting, dispensation, or a PSA is the right approach for your business. Errors on P11D forms can trigger penalties, and late submissions incur automatic surcharges.

For tailored advice, contact Severn Accounting — we’re here to help.