Payrolling Benefits: New Employer Obligations
HM Revenue and Customs (HMRC) has released a tax simplification update confirming that the payrolling of benefits will become mandatory from April 2026.
The current process allows employers to either submit P11D to report the employees' benefits for taxation purposes or register to payroll benefits, allowing the benefits to be taxed in real-time through PAYE.
Employers can currently payroll all benefits, with the exception of:
- employer-provided living accommodation
- interest-free and low-interest (beneficial) loans
Clarification will be required on how these benefits will be taxed as part of the changes.
Currently, the submission of the P11D(b) is still a requirement to report the liability of the Class 1A National Insurance contributions (NICs), even if the benefits are taxed through the payroll. The HMRC update outlines that the reporting and paying of Class 1A NICs will also move to be processed via the payroll software.
The HMRC website has full details of the current process and will update with further details on the changes from April 2026 in due course.
This represents a significant shift in how benefits are processed, the input of payroll professionals will be key to the successful implementation of these changes.
In preparation for this change, we encourage employers to begin payrolling your employees' benefits from April 2025. By doing so, you will ensure a smooth transition and avoid any last-minute complications.
To start payrolling benefits from April 2025, it is essential that you register with HMRC before 5th April 2025. Registration is mandatory & is a simple process too. You will need to make sure that you inform your payroll team of the benefits you have registered with HMRC to be payrolled, so that the correct adjustments can be made on the payroll for the 6th April 2025.
If you would like to find out more about our payroll services, and how we can assist you in the registering and payroll of your benefits, please contact the David Howard Payroll team at payroll@davidhoward.co.uk or call 0203 832 9210.
Alternatively, please use our Contact Us options on our website
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