What is a P11D?
A P11D is a form HMRC needs from employers every year for each staff member who receives taxable benefits or expenses, such as company cars or interest-free loans.
The numbers on the form help HMRC check if the right tax was paid by the employee. It also helps them fix an individual's tax code for the next year so that the money taken for tax is more accurate.
Getting a company car requires you to pay Benefit in Kind Tax (BiK), otherwise known as company car tax. They base the BiK percentage on three factors: the level of CO2 emissions produced by a car, the P11D value (the on-road price of the car) and thirdly, your personal tax bracket.
Currently, electric cars and efficient plug-in hybrids are more attractive because of their significantly lower BiK rate. In the case of The Electric Car Scheme, the benefit we offer is a brand new electric car at a substantial discount. You can learn more about BiK for electric cars in our dedicated guide: Electric Car Benefit in Kind Salary Sacrifice Guide.
To determine how much BiK you should pay, do the following calculation:
P11D value of the car x BiK rate x your personal income tax bracket = BiK tax owed.
This guide will help you understand P11Ds and how they relate to salary sacrifice and The Electric Car Scheme.
Understanding the P11D form
The P11D form layout typically includes sections for personal details, various benefit categories, and their corresponding values.
What is a P11D form used for?
As mentioned earlier, the P11D form is a document used in the UK by employers to report taxable benefits and expenses provided to employees and directors. It includes various kinds of benefits like company cars, private medical insurance, interest-free loans, and more. Employers must submit a P11D form for each relevant employee to HM Revenue and Customs (HMRC) annually. Employees who receive taxable benefits or expenses during a tax year might get given a P11D form by their employer. This form outlines the specific benefits received and their respective cash equivalent value, which is used to calculate the individual's tax liability on these benefits.
The layout typically includes sections for personal details, various benefit categories, and their corresponding values.
The primary purpose of the P11D form is to ensure that employees pay the correct amount of tax on the benefits they receive from their employment.
This holds significance when you're leasing an electric car through a salary sacrifice scheme, like The Electric Car Scheme, because it's an additional benefit separate from or in addition to your gross salary.
What is a P11D Value?
The P11D value of a car is the official price of the vehicle used for tax purposes in the UK. It includes the basic price of the car and any extras or accessories but does not include the Vehicle Excise Duty (VED) or first registration fee. This value is important because it helps determine how much tax an employee will need to pay if they use a company car for personal reasons. The higher the P11D value, the more tax the employee may have to pay.
Jeremy Hunt, the Chancellor of the Exchequer, said earlier this year that he's going to keep the taxes lower for electric cars. He promised that the tax rate increase would be minimal, only going up by 1% each year for three years, starting in 2025. Before this change, people thought the tax rate would increase from 2% straight to 5% in 2025. The tax on petrol or diesel cars that cause a lot of pollution might be as high as 37%.
Because of this low tax rate for electric cars, people who drive them can save a lot of money. But for petrol and diesel cars, the taxes are higher, making them more expensive to run because of the higher tax and overall costs.
The Electric Car Scheme sorts the BiK calculation for you, so employees nor employers need to worry. We have broken down how this works for some popular cars available at The Electric Car Scheme.
If you decide to use The Electric Car Scheme to lease a BMW i4 Gran Coupe, you'll pay £460 each month. The Electric Car Scheme aims to get you the best lease deal available, currently at £714 as of this blog. By doing this, you'll save £300 in taxes and insurance. However, you'll need to pay £48 towards your BiK tax.
If you choose to salary sacrifice the Skoda Enyaq iV Coupe, your monthly cost will be £381. The Electric Car Scheme ensures you get the best lease deal available, which is currently £571 per month as of this blog. This means you save £239 on taxes and insurance, but you will need to pay £48 in BIK tax. This is unquestionably the most affordable way to get an Skoda Enyaq, and it will stay that way as long as BIK rates remain extremely low.
Salary sacrifice for electric cars and P11D
At The Electric Car Scheme, we make it easy for employees to unlock government tax incentives and save 30-60% on any electric car. You simply agree to have a portion of your pre-tax salary deducted each month to cover the car cost. Choose the car you want, add on any extras, and drive away saving thousands of pounds.
Employees opting for an electric car through salary sacrifice benefit in two key ways.
Firstly, the lowered tax rates on electric cars result in reduced BiK taxes. This leads to decreased tax liabilities on the car's value, offering substantial savings compared to traditional petrol or diesel vehicles. Secondly, the cost-effectiveness of the lease itself improves due to these reduced tax rates. With lower BiK taxes, the taxable value of the car decreases, leading to more affordable monthly lease payments. This makes choosing an electric car a more financially viable option for employees engaged in salary sacrifice schemes.
How P11Ds work with The Electric Car Scheme
After enrolling your business in the scheme, we will annually furnish draft pre-filled P11D forms for your submission to HMRC. These forms are completed for the tax year's conclusion, incorporating Benefit in Kind (BiK) details in both the employee's and the company's P11D submissions. We aim to streamline the process, ensuring simplicity and convenience for both businesses and employees. From an administrative perspective, this service reduces the burden of form preparation and submission for employers. Employees also benefit from a hassle-free process, minimising their involvement in filling out complex tax forms.
Switching to an electric car is one of the most significant ways to make a positive change towards net zero. At The Electric Car Scheme, we want to make it cheaper and easier than any other option. Salary sacrifice makes this possible, allowing employees to save 30-60% on any electric car on any electric car by reducing their salary in exchange for an electric car as a benefit. You can use our quote tool to browse the cars we have available and learn how much you can save or you can read in more detail about how the scheme works here.
Our lease pricing is based on data collected from The Electric Car Scheme quote tool. All final pricing is inclusive of VAT. All prices above are based on the following lease terms; 10,000 miles pa, 36 months, and are inclusive of Maintenance and Breakdown Cover. The Electric Car Scheme’s terms and conditions apply. All deals are subject to credit approval and availability. All deals are subject to excess mileage and damage charges. Prices are calculated based on the following tax saving assumptions; England & Wales, 40% tax rate. The above prices were calculated using a flat payment profile. The Electric Car Scheme Limited provides services for the administration of your salary sacrifice employee benefits. The Electric Car Scheme Holdings Limited is a member of the BVRLA (10608), is authorised and regulated by the FCA under FRN 968270, is an Appointed Representative of Marshall Management Services Ltd under FRN 667174, and is a credit broker and not a lender or insurance provider.
