HMRC Scraps P11D’s For Payrolling of Benefits in Kind
In a recent tax simplification update, HMRC has announced that the payrolling of benefits will become mandatory starting April 2026. This marks a shift in how employers handle benefits, currently requiring them to either submit P11D forms or opt for real-time taxation through PAYE by registering to payroll benefits.
As of now, taxable benefits and expenses must be reported to HMRC on forms P11D and P11D(b) by 6 July following the end of the tax year (excluding certain ones like employer-provided living accommodation and beneficial loans). Details on the taxation of these exceptions are expected to be clarified with the upcoming changes later this year (see Employer Bulletin or other HMRC publications in due course).
Notably, the submission of P11D(b) remains a requirement to report the liability of Class 1A National Insurance contributions (NICs), even if benefits are taxed through the payroll. The significant updates are that:
- real-time reporting and payment of Class 1A NICs will shift to be processed via payroll software
- prompt employee communication is essential in advance of the change as individuals may experience cash flow issues for tax year 2026/27 when mandatory payrolling and PAYE code adjustments for prior years overlap.
- how last minute benefit changes for leavers will be processed before payroll cut off i.e. benefits such as company cars which usually carry a relatively high BIK implication. How loans and accommodation benefits will be processed via the payroll is yet to be defined.
paiyroll® is Always Compliant with HMRC Regulations
This transformation underscores the importance of robust payroll systems for accuracy and compliance with evolving HMRC regulations. As these changes loom, staying ahead of the game is crucial.
Choosing a reliable payroll system like paiyroll® positions you for seamless adaptation to upcoming shifts, ensuring your business remains compliant and efficient in the face of regulatory updates:
✓ real-time reporting and payment
✓ automated calculations in line with HMRC guidance (incl. leavers)
✓ automated employee communications