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Who has to pay tax on company benefits?

If you're a company director, or you earn at a rate of £8,500 or more in a year - including the value of your benefits - then you'll always have to pay tax on any benefits you get.

You may have to pay tax on some benefits - such as living accommodation that's provided by your employer - no matter how much you're paid and whether or not you're a company director.

Benefits you might have to pay tax on

Company cars

Normally, if your employer provides you with a car, you'll have to pay tax on the value of the benefit. The value depends on several things, such as:

The value of the benefit may be less if the car is unavailable for part of the year or if you pay something towards its cost - ‘capital contributions’ - or if you make payments to your employer for your private use of the vehicle.

If your employer provides you with fuel to use for your private motoring, you'll have to pay tax on this as a separate benefit.

• HM Revenue & Customs online company car and car fuel benefit calculator Opens new window

• Download 'Car benefits and car fuel benefits' (PDF, 211K) Opens new window

• Help with PDF files

• Information on changes to car benefit rules from April 2011 Opens new window

Loans at low interest rates

You may have to pay tax on this benefit if your employer lends you more than £5,000 interest free, or charges you less than the official rate of interest on a loan. The value of the benefit you'll have to pay tax on is usually the difference between:

You may also have to pay tax on the benefit if your employer lends money to one of your relatives.

You won't have to pay tax on the benefit of an interest free or low interest loan from your employer if the total of all loans provided in a year is £5,000 or less.

• Download 'Helpsheet 340 - Help with tax relief on loans' (PDF, 107K) Opens new window

• Help with PDF files

Living accommodation

If your employer provides you - or one of your relatives - with living accommodation you may have to pay tax on the benefit. There are different ways of working out the value of the benefit you'll have to pay tax on, depending on whether or not the accommodation cost more than £75,000.

You may not have to pay tax on the benefit if you're provided with the accommodation so you can do your job - or because it helps you do your job better.

• Download 'Helpsheet 202 - Living accommodation' (PDF, 108K) Opens new window

• Help with PDF files

Medical insurance

If your employer pays for your medical insurance, you'll usually have to pay tax on the value of the benefit. This is normally the cost of the insurance premiums.

Your employer can give you some benefits that you won't have to pay tax on, such as:

Other benefits

The benefits listed above are just a few of the most common ones. Your employer will give you details of the benefits they've told HM Revenue & Customs (HMRC) about on form P11D Expenses payments and benefits - see the section ‘How the tax is paid’ below.

If you need any more information about what counts as a benefit and how it is taxed, go to the A to Z list of expenses and benefits in the Employers section of the HMRC website.

• Expenses and benefits A to Z Opens new window

Tax-free benefits

In certain circumstances you can get some benefits without paying tax on them. Tax-free benefits can include:

• Expenses and benefits A to Z Opens new window

The rules relating to childcare vouchers changed on 6 April 2011. HMRC have prepared answers to the most often asked questions.

• Download 'Employer-supported childcare – guidance and FAQs' (PDF, 60K) Opens new window

• Help with PDF files

When you might have to pay National Insurance contributions on benefits

Usually your employer pays Class 1A National Insurance contributions on any non-cash benefits they provide you with and you won’t have to pay any further contributions on them – read the section ‘Benefits you might have to pay tax on’ for examples of these.

However, in some cases, the benefits are treated as if they are normal earnings. This means you’ll have to pay Class 1 National Insurance contributions on them. In these cases, the benefits provided are usually in the form of cash or they could be exchanged for cash – for example cash vouchers.

If you want to find out more about when you might have to pay National Insurance contributions on a benefit go to the A to Z list of expenses and benefits in the Employer section of HMRC website.

• Expenses and benefits A to Z Opens new window

How the tax is paid

You and your employer both have to tell HMRC about any benefits you get. You'll have to show the benefits on your Self Assessment tax return (if you complete one). Your employer will have to fill in form P11D Expenses payments and benefits or form P9D Expenses payments and income from which tax cannot be deducted.

HMRC may send you a tax code to collect the tax you owe through PAYE (Pay As You Earn).

• Tax codes - the basics

• Company benefits in your tax code

• Reporting changes that might affect your tax

Your responsibilities

Your employer will give you details of the benefits they've told HMRC about on the P11D or P9D. You'll need to keep these details for two years after the tax year they relate to. You'll need this information to fill in your tax return.

Bear in mind that you must tell HMRC about any benefits you or your family get from your employer even if you've already paid tax on them through PAYE.

• Reporting changes that might affect your tax

• Download 'Additional information notes - help with completing the employment pages of your tax return' (PDF, 223K) Opens new window

• Help with PDF files

Where to get help

Your employer will be able to help if you've got any questions about the benefits you get with your job. If you need help with filling in your tax return you can contact the HMRC Self Assessment Helpline.

• Self Assessment Helpline Opens new window

More useful links

• Tax allowances and reliefs - employees or directors

• Expense payments in your tax code

• How to file your tax return online

• Tax allowances and reliefs if you're self-employed Opens new window

Useful contacts

• Money, tax and benefits contacts