P11d Living Accommodation Section D

P11d Living Accommodation Section D relates to the cash equivalent of any payments made for living accommodation provided to employees. 

Where an employer has provided living accommodation, this is considered a benefit in kind.

The cash equivalent of the living accommodation is based on the greater of gross rating value or actual rent paid for the accommodation provided.

There is no benefit in kind for living accommodation where:

  • The employee pays a fair market rent for the living accommodation;
  • your employees can’t do their work properly without it, for example agricultural workers living on farms;
  • an employer is usually expected to provide accommodation for people doing that type of work (for example a manager living above a pub, or a vicar looking after a parish);
  • If it’s needed for security of the employee.

How to Calculate the P11d Living Accommodation Taxable Value

There are two types of charges in place to work out the taxable value of living accommodation that needs to be included on a P11d form:

  1. A Basic Charge;
  2. An Additional Charge for properties over £75,000.

The Basic Charge

The P11d taxable value is worked out as the greater of Gross Rating Value or actual rent paid for the accommodation provided.

How to Find the Gross Rating Value

The gross rating value of living accommodation for P11d purposes is set out from rates set by the Valuation Office Agency (VOA) back in 1973. At this point the VOA set out what they considered to be the market value of rent on all properties built, if they were rented.  Since then although the rates have not been reset, the Gross Rating Values they set have continued to be used for things like P11d benefits and water rates.

To find out the Gross Rating Value of an employees living accommodation then you can

  • Contact the local council where the property is located;
  • Contact the VOA;
  • Look at a water rates bill for the property;
  • Contact your water board.

New build properties from 1990 onwards generally won’t be on the list set out by the VOA, so if you need to establish the Gross Rating Value for a newer build then you could use the figure used for Council Tax purposes.  If you are unsure of the Gross Rating Value then you should seek professional advice or contact HMRC.

Repairs, Maintenance and Household Bills 

Since the Gross Rating Values set out by the VOA reflect market rent, then any payments for repairs and maintenance should not be included as part working out the gross rating value – these costs would need to be included separately in box M Other Items.

An Example of Calculating Taxable Value of Living Accommodation

An employer provides living accommodation for an employee throughout 2017/2018. The employer rents the flat at a cost of £750 per month and the flat has a Gross Rating Value of £5,000.

Total Rent Paid for 2017/2018 £9,000

Gross Rating Value as set out by VOA £5,000

The P11d taxable value £9,000

Calculating P11d Living Accommodation Taxable Value with Employee Contribution

When calculating the taxable value of living accommodation for P11d purposes, the figures should be adjusted:

  • For any contribution made by the employee towards rent from the greater of gross rating value or actual rent paid for the accommodation provided;
  • For the number of months the accommodation was provided for during the tax year;
  • Divided by the number of employees in the accommodation, if the property is shared.

An Example of Calculating P11d Living Accommodation Taxable Value

An employer provides living accommodation for an employee throughout 2017/2018. The employer rents the flat at a cost of £750 per month and the flat has a Gross Rating Value of £5,000.  The employee makes a contribution towards the property of £350 per month.

Total Rent Paid for 2017/2018 £9,000

Gross Rating Value as set out by VOA £5,000

The Greater of Rent and Gross Rating Value £9,000

Less: Total Employee contribution £4,200

The P11d taxable value £4,800

The Additional Charge for P11d Living Accommodation

An additional charge needs to be added where a property has a cost of over £75,000. When working out whether the cost of a property is over £75,000 you need to include:

  • the cost of acquiring the accommodation
  • the cost of improvements made to the accommodation, in the tax year the property was bought and the following tax year;
  • minus any payments made by the employee towards these costs or for the grant of a tenancy.

To calculate the additional charge you need to deduct £75,000 from the cost of the property and multiply this figure by the beneficial rate of interest as set out by HMRC, 2.5% for 2017/2018.

If the employee has made a contribution towards the property, then this money goes towards reducing the basic charge with anything leftover being set off against the additional charge.

An Example of Calculating the Additional Charge

An employer buys a property for £175,000 which has a gross rating value of £5,000.  The employee pays rent of each month of £500.

The Basic Charge is £0 because the rent paid of £6,000 by the employee is more than the gross rating value. The employee has contributed £1,000 above the gross rating value so this can be set off against the additional charge.

The Additional Charge is worked out as:

£175,000 – £75,000 = £100,000
£100,000 x 2.5% = £2,500
£2,500 – £1,000 (left over rent from the basic charge) = £1,500

Total value to report is £1,500 (Basic charges £0 + additional charge £1,500)

Who Pays P11d Living Accommodation Tax

Tax on Living accommodation payments included in Section D is paid by the employee with Class 1a National Insurance payable by the employer.

Anita Forrest
About Anita Forrest

Anita Forrest is a Chartered Accountant, spreadsheet geek, money nerd and creator of www.goselfemployed.co - the UK small business finance blog for the self-employed community. Here she shares simple, straight-forward guides to make self-employment topics like taxes, bookkeeping and banking easy to understand.