HMRC has announced that employers must payroll benefits in kind from April 2026.
This change will require planning for any organisation presently providing benefits in kind e.g. cars.
What we know so far:
- the intention is for payrolling of benefits to be mandatory for all employers and all benefits (including benefits such as loans and accommodation);
- income tax and class 1A NIC will need to be reported and remitted by employers through real-time information (RTI) reporting, removing the need to file forms P11D and P11D(b); and
- forms P11D/P11D(b) will still need to be produced for tax years up to and including 2025/26 (filing deadline: 6 July 2026).
For employees, the transition to payrolling benefits will not change the total amount of income tax paid on benefits. However, the method and timing for collecting income tax may change.
For employers, this will mean:
- benefits will have to be reported via payroll software rather than on form P11D;
- there will be no requirement to file forms P11D/P11D(b) for tax years 2026/27 onwards;
- class 1A NIC will still be payable, but in real-time via the payroll (and not via the P11D(b) process); and
- an annual statement of benefits received must still be provided to each employee (e.g., the year-to-date benefit value on a final payslip).
While HMRC has hailed the announcement of mandatory payrolling as a simplification that will remove the need to file forms P11D, processing benefits through the payroll brings many challenges and pitfalls.
Do you need to start planning now?
