‘Payrolling benefits in kind’ means that employee benefits in kind (e.g. company cars and medical insurance) are reported to HMRC through the employer’s payroll.

Employees’ tax codes are amended so that any income tax due on the benefits is paid throughout the tax year. If a benefit has been payrolled, it does not need to be included on form P11D.

Payrolling is possible for all benefits in kind, except for employer-provided living accommodation and beneficial (interest-free or low-interest) loans; these must still be reported on the P11D.

If an employer wishes to payroll benefits, they must register with HMRC before the start of the tax year in which they plan to start.

Regardless of whether benefits are included in the payroll or on a P11D, the employer must still include them in summary form P11D(b) and pay Class 1A National Insurance Contributions on the total taxable benefit value across the workforce.

Deadlines

The deadline for filing the P11D(b) is the 6th July, while the deadline for paying the Class 1A NIC due is the 22nd July (19th July if paying by cheque).

Payrolling benefits in kind to become mandatory

From 6 April 2026, payrolling benefits in kind will become mandatory for all employers for all benefits except for beneficial loans and living accommodation, although these will be able to be included in the payroll on a voluntary basis.

It is hoped that this will bring simplification and clarity for employers and employees. As mentioned above, it is possible to choose to enter the regime one year early, from 6 April 2025, on a voluntary basis. Please talk to us if you are considering this or otherwise have any questions about future obligations.

If you have any questions on these changes please don’t hesitate to get in touch, or review our payroll services to see how outsourcing your payroll could help your business.

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