National Insurance Contributions: Benefitting with Form P9D
Form P9D is designed for anyone earning less than £8,500* p.a. to report benefits and expenses. A person filing a P9D will not pay Class 1A National Insurance (NI). The form must be submitted to HMRC by 6 July following the end of the tax year.
*£8,500 including any taxable benefits received additional to salary.
The benefits reportable on a forms P9D and P11D are:
- Relocation expenses (exceeding £8,000);
- Living accommodation (except where exempt);
- Payment of pecuniary liability (when the company pays the bill for the employee);
- Vouchers (in exchange for goods, services or cash, including childcare vouchers);
- Cash convertible (the second-hand value of the asset).
Some benefits are not taxable for employees earning less than £8,500 p.a:
How to make the most of your benefits on a P9D
- Company cars, vans and fuel benefit;
- Beneficial loans (such as for a travel season ticket);
- Private medical insurance.
If earning less than £8,500 p.a. (a P9D employee) neither employer nor employee pay any NI contributions because Class 1A NI is not payable on benefits provided to P9D employees, even if those benefits are taxable.
Rose works for six hours a week as a delivery driver, earning a salary of £3,120 p.a. She has a company car with a cash equivalent value of £4,000. Lucy earns therefore £7,120 a year (salary plus the car, a benefit in kind of £4,000). As her earnings rate is below £8,500, however, she is not taxed on the provision of her company car, as NI is not payable on benefits provided to P9D employees or directors, even if those benefits are taxable. There is no Class 1A NI liability for her employer either.
Earning over the threshold: Form P11D
Even if you earn over £8,500, for which you would fill in form P11D, it can still be beneficial as an employee to choose the benefit over the cash salary, as this will save employee Class 1 NI contributions. See the blog