Expenses and benefits: holidays

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1. Overview

As an employer providing holidays for your employees, you have certain tax, National Insurance and reporting obligations.

What’s included

What you have to report and pay depends on whether you:

• provide a holiday, or vouchers that can be exchanged for a holiday
• arrange the holiday yourself, or your employee does
• pay for the holiday directly, or your employee pays for it and you pay them back

2. What to report and pay

What you have to report to HM Revenue and Customs (HMRC) depends on who arranges and pays for the holiday.

Holiday vouchers

If you provide your employees with vouchers they can exchange for a holiday, you must:

• report the cost on form P11D
• deduct and pay Class 1 National Insurance (but not PAYE tax) on the cost to you of the vouchers

Holidays you pay for directly

If you arrange the holiday, you must:

• report the cost on form P11D
• pay Class 1A National Insurance on the cost to you

If your employee arranges the holiday, you must:

• report the cost on form P11D
• deduct and pay Class 1 National Insurance (but not PAYE tax) on the cost to you

Holidays your employees arrange and pay for, and you pay them back

This counts as earnings, so you’ll need to:

• add the amount you pay the employee to their other earnings
• deduct and pay PAYE tax and Class 1 National Insurance through payroll

Salary sacrifice arrangements

If the cost of the holiday is less than the amount of salary given up, report the salary amount instead.

These rules don’t apply to arrangements made before 6 April 2017 - check when the rules will change.