Currently, taxable benefits and expenses must be reported on forms P11D by 6 July following the end of the tax year.
This then means the additional tax has to be paid on the benefit as well. The employee can complete a self-assessment tax return or alternatively, the tax code can be adjusted to collect the tax via PAYE.
It is possible for taxable benefits to be payrolled now (with the exception of accommodation and beneficial loans). Unlike with a P11D, the benefits value is reported to HMRC in real time via the payroll.
Where employers have payrolled employee’s benefits, they are still required to complete the form P11D(b) to report and pay the class 1A national insurance contributions due on the benefits provided.
HMRC have announced that payrolling taxable benefits will be mandatory from April 2026. This is part of their commitment to digitise and simplify the UK tax system, as well as attempting to lift the administrative burden on employers and HMRC. It is estimated that this will remove the need for 4 million end of year returns to be submitted to HMRC.
The news that class 1A NIC will be payable via payroll software is potentially welcome from an administrative viewpoint, but it is currently unknown whether the due date for paying class 1A NIC will change in line with the monthly class 1 primary NIC payments. Currently this is not due until the 22 July following the end of the tax year if the payment is made electronically.
What does this mean for my company/business?
If you are an employer that provides taxable benefits to your employees, you will need to eventually transition to payrolling these benefits. While an awareness is only required at this point, you may wish to begin the transition now, in order to minimise disruption at the later date.
We have a dedicated team available to assist you with the preparation of P11Ds up to the point of the change and assist you with the transition into and throughout the new payrolling mandate.