Payrolling of benefits-in-kind

The reporting and paying of income tax and Class 1A national insurance contributions on benefits in kind is to be made mandatory via payroll software from April 2026.

This is due to HMRC’s dual wishes of reducing the amount of paper forms they have to process and their desire to modernise tax administration by using technology to speed up their processes.

This means that the current method of submitting forms P11d and P11d(b) will be obsolete from April 2026. By payrolling the benefits, the benefits and expenses can be taxed in real time through pay as you earn (PAYE), meaning there’s no mid-year tax code changes (not down to these benefits received anyway) and less confusion caused for employees.

There are benefits such as providing living accommodation and low-interest loans which cannot yet be done this way, but HMRC’s intent is to resolve those problems prior to the payrolling method becoming mandatory.

Although this feels like it is far off into the future, we recommend that employers start getting used to “payrolling” their benefits in kind sooner rather than later.

If you wish to learn more about this subject, please contact Matthews Hanton and speak to one of our team.