Strengthening HMRC’s Reminder on P11D Loan Reporting

HMRC has issued a reminder to UK employers regarding the reporting of loans to directors and employees exceeding £10,000 on Form P11D for the 2024/25 tax year. This move underscores HMRC’s focus on tax transparency and compliance. Understanding the Requirement Employers are obligated to report interest-free or low-interest loans provided to employees or directors as benefits in kind (BiKs) on Form P11D. Specifically, if the total outstanding loan amount to an individual exceeds £10,000 at any point during the tax year, it must be reported. This includes loans that are not repaid by the end of the tax year. The deadline for submitting P11D and P11D(b) forms for the 2024/25 tax year is 6 July 2025. Implications for Businesses Failure to accurately report these loans can result in penalties and interest charges. Employers are advised to review their financial records to identify any such loans and ensure they are properly documented and reported. It’s also essential to calculate the cash equivalent of the benefit, which involves determining the difference between the interest charged (if any) and the official rate set by HMRC. As of 6 April 2025, HMRC’s official interest rate increased from 2.25% to 3.75% per annum. Preparing for Future Changes Looking ahead, from April 2026, real-time reporting for benefits-in-kind will become mandatory, replacing the current P11D form submissions at the end of the tax year. This change requires employers to process taxable benefits directly through payroll, ensuring monthly tax collection instead of year-end adjustments. While beneficial loans and employer-provided living accommodation will continue to be reported via P11D initially, businesses should start preparing for this transition by assessing their payroll systems and processes. The Times Action Steps

• Review Loan Agreements: Identify all loans provided to employees and directors during the 2024/25 tax year.
• Calculate Benefits: Determine the cash equivalent of each loan benefit using HMRC’s guidelines.
• Submit Forms: Ensure P11D and P11D(b) forms are accurately completed and submitted by 6 July 2025.
• Plan for Real-Time Reporting: Evaluate and update payroll systems to accommodate upcoming changes in benefits reporting.

By proactively addressing these requirements, businesses can maintain compliance and avoid potential penalties. If you are not show how this may affect you, please contact us and we will be happy to help.