As of April 2026, employers are now mandated to report and pay Income Tax and Class 1A National Insurance Contributions (NICs) on benefits in kind through their payroll system. This move marks a shift away from the traditional P11D reporting system.

The primary goal of this mandate is to simplify the tax system for benefits. By mandating the payrolling of benefits in kind, it will significantly reduce the admin burden on both employers and on HMRC.

So, what do you need to know?

Payrolling benefits in kind: Simpler taxes and happier employees

Many businesses offer benefits in kind to their employees, providing value alongside traditional salary. These benefits can range from company cars and healthcare to gym memberships and childcare vouchers. While beneficial to employees, managing these tax-implicated benefits creates administrative work for employers which can get costly with the manual and time-consuming P11D process.

Payrolling benefits in kind simplifies this process and offers advantages to both you and your employees.

What is payrolling benefits in kind?

Instead of reporting benefits to HMRC on the annual P11D form, payrolling adds the estimated value of the benefit to an employee's regular payroll. The corresponding Income Tax and National Insurance contributions for the benefit are then deducted along with their regular taxes.

Key advantages

• Less administration: No more year-end rush with P11D and P11D(b) filings.
  
• Simpler, more accurate payroll: Consistent deductions throughout the year improve payroll accuracy.
  
• Real-time tax: Employees pay benefit-related taxes as benefits are received, preventing surprises in the next tax year.
  
• Happier employees: Easier-to-understand payslips build trust and increase satisfaction.
  

Important deadlines to consider

HMRC has made payrolling benefits easier than ever before. The key date to remember is 6 April 2024. You must register before this date if you wish to payroll your benefits in the 2024/25 tax year.

Is payrolling right for your business?

If you offer any taxable benefits in kind, payrolling them could be a wise move. It can save your company time and resources and improve the employee experience.

How to get started

• Choose benefits: Determine which benefits you'd like to payroll.
  
• Inform HMRC - You'll need to notify HMRC that you're using payrolling to report benefits.
  

Need more information or support?

We can help you through this transition. With our team of specialist, our advisory service can support you on payrolling benefits through your in-house payroll software, or support you as an outsourced service to operate your payroll and benefits.