As a provider of employee benefits, the changes announced by the government regarding the compulsory payrolling of benefits in kind will mean that you will no longer be able to report employee benefits on form P11d from April 2026.
Instead, employee benefits should be taxed through the payroll scheme. This will bring the employee benefits in line with the RTI reporting of the PAYE scheme.
The Form P11d(b) form will however still need to be completed and submitted to HMRC annually so that employers can calculate their Class 1A National Insurance due on providing the benefits.
The announcement is still in its early stages of development with HMRC and as such subject to further adjustment. As we have seen with the introduction of MTD, HMRC will need to ensure that there is sufficient information provided to software developers and testing to be undertaken before implementation.
It has however been possible to payroll employee benefits since 2016, so there is plenty of information available to employers on how this process works.
Registering to payroll benefits
Employers currently must register to payroll benefits. The registration must be completed before the start of the new tax year. For example, to payroll benefits in the 2025/26 tax year, the registration must be made before 5th April 2025.
Benefits you can payroll
Currently, all benefits can be processed through the payroll with the exception of:
- Employer provided living accommodation
- Interest free and low interest loans (beneficial loans)
This may be subject to change as HMRC removes the form P11d.
Company cars
If you are payrolling company cars, there is no need to submit a P46 (Car).
Telling your employees
You must provide your employees with written notification by 1st June after the tax year that you are going to start payrolling benefits.
You must include details of the benefits you are going to be running through the payroll, the amount you have payrolled for optional remuneration and (if applicable) the details of the benefits that are not included within the payroll.
What this means for your employees
Under the current P11d process, the PAYE due on benefits is collected through an amendment to an employee’s tax code. This then reduces the tax-free allowance available for salary payments.
For benefits that are processed through the payroll, the adjustment to an employee’s tax code relating to the benefits received is removed, and PAYE is paid along with salary.
At the end of the tax year, you will have to notify your employees of the total amount of benefits received and what benefit this was in relation to.
For further in-depth HMRC guidance, please click here or if you have any queries or would like to discuss this subject further, please don’t hesitate to get in touch with Emily Tipson.
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