What is a P11D or Benefit in Kind?

I own a company and I’m looking to take out group protection policies for my employees. However, I’m not really sure how tax works on employee benefits.

Will I need to pay tax on premiums? Do employees need to pay tax on insurance paid for by the company? I think I’ve heard my accountant mention something about P11D benefits, but I don’t know what they are.

Question asked by Laura Grisham

Are Employee Benefits A P11D Or Taxable Benefit in Kind?

When it comes to the taxation of certain employee benefits, it can get a bit confusing. What exactly do you pay tax on and what exactly is tax-free?

If you’re looking to take out any form of Employee Benefits package for your employees then you’ll need to know about benefits in kind, the P11D form and how these work.

How A Benefit In Kind Works

A benefit in kind is effectively a benefit that an employee or director receives from their employer. It’s not counted as part of their salary. For instance, benefits in kind include:

  • Company cars
  • Company mobile phones
  • Childcare
  • Accommodation.

While benefits in kind are usually highly valued, there’s an issue that complicates the matter — how employee benefits are taxed.

Because the company pays for benefits with pre-tax earnings and provides them in addition to an employee’s salary, HMRC effectively sees this as the employee’s salary rising without the additional amount being subject to PAYE tax.

So to reclaim the additional tax, HMRC requires one of two options. Firstly, employers can take the owed tax from their employees through payroll. Alternatively, the employer can declare these expenses at the end of the tax year in order for HMRC to value and tax them accordingly.

What is a P11D?

When completing their end of year financial reporting, employers need to fill out a P11D form. This is a way to report employer-provided expenses and benefits the employer paid for that tax year.

Employees don’t usually need to fill out a P11D form when they receive a taxable benefit. However, if you’re a freelancer or contractor arranging a P11D benefit via your company, you’re technically both employer and employee. In your capacity as the employer, you’ll therefore need to fill out a P11D as part of your self-assessment tax return.

Which Group Insurance Products Are A P11D Benefit?

This depends on the employee benefit in question. A brief summary of the tax position on the four most common types of employer-provided group insurance policies is laid out below.

However, we strongly recommend you seek professional advice on your company’s tax position before implementing an employee benefit.

Is Group Health Insurance a Benefit in Kind?

Business Private Medical Insurance is a taxable company paid insurance policy.

The typical way that employer-provided Medical Insurance is taxed is that the business pays for the premiums and employees pay tax on the benefit.

HMRC usually does this with an adjustment of an employee’s personal allowance, so employees earn less before tax is paid in the following tax year.

How Is Group Life Insurance Taxed? Is It A P11D Benefit?

Group Life Insurance — also known as Death in Service cover — is generally permitted as a business expense for an employer. Employees usually don’t have to pay any tax on group life insurance premiums, either. This is because Group Life Cover is HMRC approved and isn’t considered a P11D benefit.

It should also be also written into trust, so the benefit goes to the employee’s loved ones tax-free.

Is Group Income Protection a P11D?

Group Income Protection is not normally considered a taxable benefit in kind for the employee. Moreover, it’s usually an allowable business expense for the employer.

That means neither employer nor employees usually have to pay additional tax on Group Income Protection premiums. However, HMRC will tax the benefit on a claim via the PAYE system just like wages.

Is Group Critical Illness Insurance a Benefit in Kind?

Yes, Business Critical Illness Cover is generally considered a P11D for employees.

HMRC usually allows Group Critical Illness Cover as a business expense for employers. However, employees must pay tax on the premiums their employer pays on their behalf.

This is certainly not an exhaustive list of employee benefits you can provide and their tax position.

If you need help considering your options when it comes to setting up a competitive employee benefits package pop us a call on 02074425880 or email help@drewberry.co.uk.

Compare Top 10 UK Providers

Takes approx. 60 seconds
Verified by Norton Symantec icon
 Or Call Us

Frequently Asked Questions

Contact Us

Head Office & Pensions and Investments
Senator House
85 Queen Victoria Street
Personal Insurance & Accounts Payable
Telecom House
125-135 Preston Road
Drewberry London Office MapDrewberry Brighton Office Map

If you are unhappy with our service, we have a complaints procedure, details of which are available upon request. If you are unhappy with how your complaint has been dealt with, you may be able to refer your complaint to the Financial Ombudsman Service (FOS). The FOS website is www.financial-ombudsman.org.uk.

Drewberry Ltd is registered in England and Wales. Companies House No. 06675912

Drewberry Ltd registered office: Telecom House, Preston Road, Brighton, England, BN1 6AF. Telephone 0208 432 7333

Drewberry Ltd (Financial Conduct Authority No. 505473) is an Appointed Representative of Quilter Wealth Limited and Quilter Mortgage Planning

Limited, which are authorised and regulated by the Financial Conduct Authority.


Drewberry™ uses cookies to offer you the best experience online. By continuing to use our website you agree to the use of cookies including for ad personalization.

If you would like to know more about cookies and how to manage them please view our privacy & cookie policy.