This guide explains your tax and National Insurance contributions (NICs) obligations if you provide living accommodation to an employee.
On this page:
If any of the following conditions apply to accommodation you provide to an employee, then you don’t have to report the benefit or pay tax or NICs on it:
The 'necessary' and 'customary' exemptions only apply to company directors if they control no more than 5 per cent of the shares in the company and if they either work:
If you provide accommodation that falls into one of the categories above, you may also be able to cover certain related costs without having to pay tax or NICs. See the sections ‘Council Tax, water or sewerage charges ‘ and ‘Other costs including furniture heating, lighting, maintenance’.
You have:
You provide an employee with accommodation that isn’t covered by the exemptions explained in the previous section.
In order for accommodation to have been ‘provided’ for tax and NICs purposes, it may be enough for you to have made it available to an employee – even if the employee doesn’t actually use it. For more detailed guidance on this point, see the relevant links in the ‘Technical guidance’ section.
For employees earning at a rate of less than £8,500 per year:
For company directors or employees earning at a rate of £8,500 or more per year:
Follow the link below to find out how to work out the value to report.
Living accommodation – work out the value to report
You pay the Council Tax or water or sewerage charges relating to a property that you’ve provided to an employee.
If any of the exemptions outlined in the section ‘Accommodation you can provide free of tax and NICs’ apply, then you have:
If none of the exemptions outlined in the section ‘Accommodation you can provide free of tax and NICs’ applies, then the tax, NICs and reporting requirements differ depending on how you cover the costs.
If your employee meets the costs and you reimburse them:
If you pay the council or utility company directly:
The value to use is the amount you pay or reimburse.
The costs covered here are:
If your employee meets the costs and you reimburse them:
If your employee arranges the contracts for the goods or services, but you pay the supplier directly:
If you arrange the contracts for the goods and services and pay the supplier for them:
If none of the exemptions outlined in the section ‘Accommodation you can provide free of tax and NICs’ applies, the value to use is the full cost to you of the heating, lighting, etc.
If any of the exemptions outlined in the section ‘Accommodation you can provide free of tax and NICs’ apply, then there is a partial tax and NICs exemption for these other costs. The reportable value is limited to 10 per cent of the employee’s net earnings, minus any contribution they make to the costs.
It’s important to choose correctly between forms P11D and P9D for each employee. The form to use depends on the whether the employee is a director of your company and on whether their earnings are above or below an annual rate of £8,500. For more information – including details of what’s included in the £8,500 threshold - follow the link below.
EIM21720: heating, lighting, cleaning, etc
EIM11405: the meaning of ‘provided’
EIM11501 - Living accommodation: part of premises used for business purposes: overview
EIM11331: Living accommodation - description of exemptions
EIM11432: Living accommodation - definition of annual value
EIM11411: Living accommodation - provided to more than one employee
EIM11473: Living accommodation - cost basis or market value basis
