The government is expanding the current payrolling process for the reporting and payment of Income Tax and Class 1A National Insurance Contributions on benefits in kind. This will mean that payrolling of benefits in kind (BiKs) will be mandated from April 2026.
More information is available about the Simplification Update statement on the parliament.uk website.
Payrolling the Income Tax due on benefits in kind is currently available to employers on a voluntary basis.
Those who do not wish to payroll are still able to file form P11D at the end of the year. Class 1A National Insurance contributions cannot currently be payrolled so a P11D(b) form needs to be submitted at the end of the year.
Preparing for Payrolling
Considering the recent announcement, HMRC encourages anyone who can begin payrolling voluntarily to do so in preparation.
As part of the work to modernise and simplify the reporting and payment of Income Tax, agents will be able to register to payroll benefits in kind from April 2024. The 2025 to 2026 tax year will be the first year that you will be able to payroll benefits in kind.
HMRC is engaging with stakeholders to discuss proposals to inform design and delivery decisions. Draft legislation will be published later in the year as part of the usual tax legislation process.
HMRC will also work with industry experts to produce guidance, which will be made available in advance of 2026.
If you wish to provide feedback relating to the mandating of payroll software to report benefits you can email policyemploymentbenefitsexpenses@hmrc.gov.uk.
How Payrolling being mandated will affect you
If you provide BiKs to your employees, Income Tax and Class 1A National Insurance contributions will have to be reported and paid in real time via payroll software from April 2026.
The 2025 to 2026 tax year will be the last year that we will accept P11Ds and P11D(b)s for annual reporting of BiKs in most cases.
HMRC will help businesses to prepare for the transition by providing guidance in advance of 2026.
Helping you with Payrolling
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