The government made a big announcement on 16th January 2024 stating that payrolling of benefits in kind would become compulsory for employers from 6th April 2026.
This will be a huge change! This will bring to an end the need for the submission of P11D forms, a form that we have grown to know and love over many, many decades!
Accordingly, employers will have to report and apply income tax and Class 1A NIC on benefits in kind via payroll software from 6th April 2026. Currently, payrolling BIKs is voluntary, but it will become compulsory from that date. Employers at present have the choice of either payrolling benefits in kind or completing and submitting a P11D form, with details of the benefits provided to an employee recorded on it.
Currently employers can payroll all benefits in kind except:
- Interest-free and low interest (beneficial) loans
- Employer provided living accommodation
HMRC will therefore clarify, in due course, as to how these two benefits will be taxed and reported under the new post 2026 regime.
Employers who at present payroll benefits in kind still currently need to report and pay Class 1A separately, using the form P11D(b). Under the new proposals, Class 1A will be reportable and payable via payroll software. This is very welcome from an administrative point of view, but how will it be payable? Will it be due monthly? We shall have to wait and see!
Further discussions and consultations will take place between HMRC and stakeholders, with the intention of publishing draft legislation later this year. HMRC will work with industry experts in order to produce guidance, which will be made available well In advance of 6th April 2026. Further additional information will gradually be made available and published via HMRC employer bulletins.
Employers who do not currently payroll benefits will have to choose the appropriate payroll software to use and also must plan ahead in readiness for the commencement of the new regime from 6th April 2026.
There are also rumours stating that, on the commencement of compulsory payrolling of benefits, Class 1A will be scrapped, and Class 1 NIC will apply to benefits in kind as well as salary. This would result for the first time ever in employees and directors having to pay NIC on BIKs, as well as employers!
But this will surely never happen, will it?
Exciting times ahead!
Tim Palmer, CTA ATT,
Tax Consultant
Gravita
What next?
Learn more about the many services Gravita’s payroll team can help you with, which include payrolling of benefits. To speak to a member of the payroll team please drop us a line at hello@gravita.com.
