Payrolling of employment benefits from 2026 will change P11D requirements

Payrolling of employment benefits from 2026 will change P11D requirements

The reporting and payment of income tax and Class 1A National Insurance Contributions (NICs) on benefits in kind (BIK) will need to be made through payroll software from April 2026.

The reporting change to employment benefits is part of HMRC’s plans for a move to a digital tax authority but the timetable for the rollout is tight with just two years for payroll providers to develop the software.

When HMRC announced the launch date of April 2026, they announced that the move was to ‘build on the progress already made on the government’s ambition to fully digitalise the reporting of benefits in kind.’

Once in place this will reduce administrative work for HMRC and thousands of employers by simplifying and digitising the process of reporting and paying tax on all employment benefits as they will no longer have to submit end of year returns.

The decision was confirmed in a policy paper on tax simplification measures released by HMRC on 16 January.

HMRC have advised that they will engage with stakeholders to discuss the proposals and draft legislation will be published later in 2024.

Although payrolling BIK removes the need for employers to submit forms P11D for these BIK, class 1A NIC currently still needs to be reported and paid separately to HMRC using form P11D.

The news that class 1A NIC will be payable via payroll software is potentially welcome from an administrative viewpoint, it is currently unknown whether the due date for paying class 1A NIC will change.

As and when more information becomes available, we will update our website at Kennedys Accounting. If you need any payroll help, please get in touch.

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