What happens next, following 2015/16 benefits declarations?

6^th July 2016 saw the deadline of the P11D/P9D submissions to HM Revenue & Customs (HMRC).  These forms captured all the taxable benefits made available to employees during the tax year 6^th April 2015 to 5^th April 2016.

Examples of the taxable benefits include:

• Health insurance
• Cycle to work schemes
• Relocation

Company cars are reported to HMRC at the time of availability but are also included on the forms.

What Happens Next?

In light of these forms, HMRC will currently be in the process of calculating the reported taxable benefits and applying them to the employee’s tax code.

This basic example shows how this is achieved for an employee with reported taxable benefits:

HMRC will reduce the employee’s personal allowance by the reported taxable benefits.

For example: If the personal allowance of £11,000 is reduced by £2,000 the tax code would be 900L.  The employee will then pay tax on the £2,000 of benefits over the course of the tax year.

Where an employee’s taxable benefits exceed the personal allowance, the tax code issued will commence with a ‘K’.

For example: If an employee’s benefits exceed their personal allowance by £2,000, the resulting tax code would be K200.  The employee would therefore have to pay an additional £2,000 on top of their taxable pay for the year.

What to Expect

Changes to tax code changes are issued by HMRC during August and September. Individuals with taxable benefits will receive their new tax codes and will then see an effect on their net pay. Inevitably, these changes will also result in an increase in payroll related queries.

Should you require any further advice or have any questions please do not hesitate to contact Jemma Jenkinson or a member of our experienced Payroll department.