Benefits in kind

In some cases, an employee can avoid being taxed on a benefit if they ‘make good’ the value of the benefit by reimbursing their employer. There are strict time limits for doing this.

Reimbursements of taxable non-payrolled benefits for 2025/26 must be made by 6 July 2026, which aligns with the date for submitting the P11D forms.

The deadlines for making good 2025/26 payrolled benefits are:
– 1 June 2026 for the value of vehicle fuel used; and
– 5 April 2026 for all other benefits.

The deadlines for making good do not apply to interest payable on beneficial loans and overdrawn directors’ loan accounts. Where such loans exceed £10,000 at any point in the tax year, there is a taxable benefit if insufficient interest is paid. This benefit takes account of the loans outstanding throughout the year, not just the days when the balance was above £10,000.

This taxable benefit can be avoided if interest at least equal to the Official Rate is reimbursed, as long as the borrower is legally obliged to pay interest. The Official Rate is currently 3.75% p.a.

Despite this exclusion from the reimbursement deadlines, most people should try to pay any interest due on a loan by the 6 July following the tax year, to avoid any doubt as to whether a benefit arises at the time the P11D form is being prepared.

Tax planning points
o Don’t miss the deadline for ‘making good’ any benefits you have received, if you want to avoid a tax charge.

o The benefit charges for having an employer-owned car available for private use are increasing on 6 April and are due to continue doing so over forthcoming years. If you have a company car, or provide them for your staff, make sure that they remain a tax efficient means of remuneration. You may wish to consider switching to a lower emission vehicle, to reduce the tax charge.