Tax and National Insurance (NI)

• Employer’s NI will rise by 1.2%, reaching 15% from 6 April 2025.
• Employer’s NI secondary threshold the level at which business start paying National Insurance on each employee’s salary will drop from £9,100 a year to £5,000, which means employers may have more NIC costs.
• Employment allowance will be increased from £5,000 to £10,500 and be extended to all eligible employers due to the removal of the £100,000 cap, allowing more employers to benefit from this allowance.
• Income tax and NI threshold freeze won’t be extended beyond 2028/29.

National Living Wage (NLW) and National Minimum Wage Increases

• From April 2025, the NLW will rise by 6.7%, taking the hourly rate from £11.44 to £12.21 for workers over 21.
• The National Minimum Wage will also rise for younger workers, with 18 to 20-year-olds seeing a record 16.3% increase from £8.60 to £10.00 per hour.

Rates of Vehicle Tax

• Company car tax rates will be set for 2028/29 and 2029/30 to allow business to plan long term.
• Zero emission and electric vehicles will increase by two percentage points in each year rising to 9% in 2029/30.
• Cars with emissions between one and 50g of CO2 per kilometre will rise to 18% in 2028/29 and 19% in 2029/30.
• All other bands will rise by one percentage point in both 20218/29 and 2029/30.

Company cars tax rates being available this far in advance is good news for companies looking to plan their fleet strategies and budgets. The tax rates for cars with emissions between one and 50g of CO2 per Km may see substantial increase in 2028/29.

Benefits in Kind

• Confirmed plans to mandate payrolling benefits in kind via payroll software from April 2026.
• Employment related loans and accommodation will remain processed via P11D and P11D(b) forms as these can be difficult to value accurately within the tax year.

HMRC stated that they intend to make changes in the future to mandate the payrolling of these benefits, but for the time being employers will have the option to continue with the P11d and P11d(b) forms process if they require.

Other

• Reform of Overseas Workday Relief (OWR) was also announced with the relief being extended to a four-year period to align with the new FIG regime. Claims for OWR will be subject to an annual limit of the lower of £300,000 or 30% of the employee’s net employment income and requirements for the relevant income to be kept offshore will be removed.

The Employment Rights Bill was published on 10 October 2024. This introduced 28 significant reforms to a range of measures. These changes are set to reshape the landscape of employment law. The majority of reforms are anticipated to take effect from 2026, with most consultations expected to begin in 2025 and our Legal team can provide more details of these if required.

Additional Information

If you would like any further information on the changes and how they might affect you or your business, please do not hesitate to contact your usual Dixcart UK contact or enquire at hello@dixcartuk.com.

It is that time of year again – when we are thinking about your P11Ds. We are pleased to provide you with this handy guide on benefits in kind.

What are benefits in kind?

Benefits in kind (BIKs) are benefits that employees or directors receive from their company which isn’t part of their salary package. Under general tax law most benefits are taxable remuneration and have to be reported to HMRC and any tax or NICs paid. 

There is a wide range of benefits in kind – from company cars to private healthcare that need reporting to HMRC.

Taxable benefits

A main list of taxable BIKs, including:

• Company cars
• Fuel for a company car for the employee’s personal use
• Loans for rail season tickets
• Interest free loans to employees/directors over £10,000
• Home phones with personal use
• Private Health Insurance
• Clothing allowance that is not essential for the employee’s job role
• Provision of Living Accommodation

Non Taxable Benefits

A few examples where circumstances may mean no tax is paid include:

• Parties and similar functions for all staff, costing no more  than £150 ‘per head’, including VAT and associated costs such as transport.
• Provision of one mobile phone where the employer contracts directly with the supplier. Any other contract or payment is taxable and NI’able and has specific treatment depending upon who the contract is with and how it is paid.
• Free or subsidised meals available for all employees. Working lunches are also tax free if available to all.
• Subscriptions for an individual who is a member of a professional body approved by HMRC.
• Car parking
• Approved mileage allowance payments for use of an employee’s car on business.

1^st 10,000 miles                                        45p per mile

Excess mileage                                         25p per mile

Motorcycles                                             24p per mile

Bicycles                                                      20p per mile

Passengers                                                 5p per mile

• Business travel but not ordinary commuting. These rules are complex especially for regular travel to a ‘temporary workplace’ and if this lasts more than 24 months.
• Relocation expenses up to a value of £8,000, subject to specific rules.

Trivial Benefits

There is a statutory exemption from tax and NIC for trivial benefits costing £50 or less. This only applies if the following conditions are met:

• The benefit cannot be cash or a cash voucher (Gift Vouchers are allowed)
• The average cost per person does not exceed £50 for each event
• The benefit is not provided through a salary sacrifice arrangement
• The benefit is not provided in recognition of services performed by the employee

To avoid smaller companies taking advantage of this, any benefits provided to directors or other office holders (or their families) have the exemption capped at a total cost of £300 per tax year.

Normal employees do not have this £300 limit but the exemption does apply to family or household members so if there is a function where partners are invited then each employee’s partner can share the £50 trivial benefit for the particular event.

If any of these conditions are not satisfied, the benefit is taxed in the normal way, subject to any other exemption (such as the annual staff function exemption). Importantly, if the cost exceeds the £50 limit, the whole of the benefit is taxed, not just the excess.

The rules around benefits in kind are complex and each example needs to be looked at based on its individual circumstances to see if any tax is payable by the employee and/or your company. There are many limits and exceptions within each of the options.

We will be pleased to assist in the review of the treatment of any expenses payments, which may not be covered above.

Reporting a benefit in kind

Benefits in kind are reported on a P11d form by the employer, not the employee. 

If a company offers their employees any of the taxable benefit in kind examples listed above, they will need to be included on your P11d.

A company will also need to file a P11d(b) form, which summarises the individual P11d forms they have completed for their employees and how much National Insurance will need to be paid. A company has to pay NICs at a rate of 13.8% for the tax year 2021/2022 of the determined values of the benefits in kind.

The P11ds must be filled by 6^th July 2022 for the tax year running 6^th April 2021 to 5^th April 2022.

P11d penalties for late filing

If you miss the deadline of 6^th July your company will incur fines of £100 per every 50 employees per month, or part month, until payment is received. You will also be charged penalties and interest if you are late paying HMRC.

Important Comment

Inform each employee of the details being returned before the form is submitted to HMRC so employees can point out any mistakes.

Further Information

If you do have any further related P11d queries, please get in touch and we can give you tailored advice on what your company needs to do to ensure compliance.

If you would like more information, please contact Edita Rendall or Paul Webb at hello@dixcartuk.com or your usual Dixcart UK contact.