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By BHSF | March 2nd, 2026
Reviewing employee benefits ahead of P11D reporting
With the tax year ending in April, many HR and payroll teams will be preparing for the annual process of confirming employee benefit reporting obligations.
P11D season arrives every year, bringing with it tax considerations, reporting requirements and, for many organisations, questions that often only surface as deadlines approach. As the end of the tax year draws near, this is a useful moment to ensure the full picture is understood.
When an employer provides a benefit to employees outside of their salary, such as a health cash plan, private medical insurance or similar cover, HMRC classes it as a benefit in kind (BIK).2 Because it provides value in addition to salary, it is generally treated as taxable.
In practice, this means three things. Employees may be liable for income tax on the value of the benefit. The employer pays Class 1A National Insurance Contributions on that value, currently at 15%.3 And the benefit must be reported to HMRC, typically via P11D, submitted by 6 July following the end of the tax year.4
For HR teams reviewing benefit expenditure, it is worth keeping in mind that the true cost of providing a benefit extends beyond the policy or premium cost. Class 1A National Insurance adds to the employer's outlay, and employees receive a benefit that carries an associated tax cost.
The standard BIK treatment applies in most circumstances. However, since 2016 HMRC has provided a statutory exemption that, where specific conditions are met, may mean certain benefits can be provided without triggering income tax, Class 1A National Insurance or P11D reporting obligations.1
The exemption applies where four specific conditions are all satisfied, one of which is that the cost of the benefit does not exceed £50 per employee per year.5 All four conditions must be met in full. The structure and documentation of the arrangement matters as much as the cost, and if any condition is not satisfied, the standard taxable treatment applies.
Whether the exemption is applicable will always depend on individual circumstances. Independent professional advice should always be sought before relying on it. But for HR decision-makers responsible for benefit design and review, it is a provision that is worth understanding, both when assessing existing arrangements and when considering introducing new ones.
With the tax year ending on 5 April, this is a practical moment for HR teams to look at two things.
The first is this year's P11D obligations. It is worth confirming that any taxable Benefits in Kind are being reported correctly, that Class 1A National Insurance is fully accounted for, and that the necessary returns will be submitted on time. Getting this right protects the organisation from penalties and ensures employees are not left with unexpected tax liabilities.
The second is whether the trivial benefits exemption could be relevant to any current or planned benefit arrangements. For organisations that have not previously considered this, taking the time to understand the conditions and seek appropriate advice before the new tax year begins is a worthwhile step. Going into the 2026/27 tax year with a clear picture of both obligations and options is a stronger position than carrying uncertainty forward.
For HR teams who want to review their current position in more detail, we have produced a practical guide.
Understanding Tax and P11D Reporting for Employer-Funded Health Benefits is a free, practical guide written for HR decision-makers. It covers how Benefits in Kind are taxed, what P11D obligations involve, and how HMRC's trivial benefits exemption operates, including the four statutory conditions, implementation considerations and common pitfalls to be aware of.
Updated for the 2025/26 tax year and written in plain English, it is designed to support informed decision-making, not to replace independent professional advice.
This article provides a general overview only and does not constitute tax or financial advice. The applicability of any HMRC exemption depends on individual employer circumstances. Always seek independent professional advice before relying on any tax exemption. Reflects UK tax legislation and HMRC guidance for the 2025/26 tax year (as at February 2026).
1.HMRC, Employment Income Manual — Exemption for Trivial Benefits (EIM21863–EIM21864, from 6 April 2016). Available at: gov.uk/hmrc-internal-manuals/employment-income-manual/eim21863
2.HMRC, Employment Income Manual — Benefits in Kind: General Principles (EIM20000 onwards). Available at: gov.uk/hmrc-internal-manuals/employment-income-manual
3.HMRC, Class 1A National Insurance Contributions on Benefits in Kind (CWG5), 2025. Available at: gov.uk/government/publications/cwg5-class-1a-national-insurance-contributions-on-benefits-in-kind
4.HMRC, Expenses and Benefits — A Tax Guide (480). Available at: gov.uk/government/publications/480-expenses-and-benefits-a-tax-guide
5.HMRC, Tax on Trivial Benefits. Available at: gov.uk/expenses-and-benefits-trivial-benefits
