Payrolling of benefits in kind to become mandatory

Last month, HMRC announced that from April 2026, the reporting and paying of Income Tax and Class 1A National Insurance on benefits in kind (BIK) via payroll software will become mandatory.

 

What is the current system?

Employers currently have two options when it comes to reporting their BIKs and taxable expenses.

Option one is to report via a P11D submission which adjusts the employees’ tax codes the tax year after the benefits or expenses were received.

On occasion, this can cause problems with employees’ understanding of why tax codes change mid-tax year, as P11Ds don’t need to be reported to HMRC until 6 July following the tax year end when the employee received the BIK.

Option two is for employers is to payroll benefits which allows the benefits and expenses to be taxed in real time through pay as you earn (PAYE), meaning there’s no mid-year tax code changes due to BIK and so less confusion caused for employees.

At present, payrolling BIK is voluntary and employers are still required to quantify the Class 1A on a form P11D(b) by 6th July following the end of the tax year.

 

Why is payrolling BIKs becoming mandatory?

The aim of this is to reduce the administrative burden for employers and HMRC and will remove the need for P11D(b)s to be submitted.

 

When will these changes come into effect?

The changes will come into effect in April 2026, although moving to payrolling BIK beforehand could reduce the administrative burden before it becomes mandatory.

It is not yet clear if the date for paying 1A NIC will change and more information on this matter will follow.

As always, if you need our help or advice get in touch at hello@chw-accounting.co.uk


This article is for general guidance only. It provides an outline, and may not include points which are important to your situation. You should not depend on this blog without taking advice based on the full facts of your case. The information given was correct at the time of publication.

DID YOU FIND THIS USEFUL?

Share it with your network:  

Want more great content?
Sign up to our newsletter

    Follow us

    Tweets by @CHW-accounting

    CHW-Accounting
    @chw-accounting


    Twitter: chw_accounting

    WHAT'S THE NEWS?

    Grab a biscuit and a brew and read our latest news.

    8 March 2024

    CHW Spring Budget report

    by

    Chancellor Jeremy Hunt presented his 2024 budget this week. A 2p cut to National Insurance, a new tax on vaping and an increase to the salary…


    Read more >

    4 March 2024

    Enhanced powers for Companies House to tackle fraud

    by

    The Economic Crime and Corporate Transparency Act (ECCT) passed into law in October 2023. The Act makes far-reaching changes to UK company law which will have…


    Read more >

    1 March 2024

    Advisory Fuel Rates from 1 March 2024

    by

    HMRC has cut advisory fuel rates for users of company cars which will apply from 1 March 2024. Here’s a quick recap of what the rules…


    Read more >

    1 March 2024

    Payrolling of benefits in kind to become mandatory

    by

    Last month, HMRC announced that from April 2026, the reporting and paying of Income Tax and Class 1A National Insurance on benefits in kind (BIK) via…


    Read more >

    19 February 2024

    Tax changes – What’s new in 2024?

    by

    We are now well and truly into 2024 and before you know it the end of the 2023/24 tax year on 5 April will be upon…


    Read more >

    YOUR CHALLENGES

    No matter what your challenge is, we’ve probably dealt with it before.



    Need an Accountant?

    Get in touch >


    Need an Accountant?

    Get in touch >


    Tax issues?

    Find out more >


    Tax issues?

    Find out more >


    Trying to grow your business?

    We can help >


    Trying to grow your business?

    We can help >


    Managing cashflow?

    We can help >


    Managing cashflow?

    We can help >


    Starting a business?

    We can help >


    Starting a business?

    We can help >


    Looking for funding?

    Need help with funding? >


    Looking for funding?

    Need help with funding? >


    Buying or selling a business?

    We can help >


    Buying or selling a business?

    We can help >


    Adopt the cloud?

    We can help >


    Adopt the cloud?

    We can help >


    What else can we do for you?

    We can help >


    What else can we do for you?

    We can help >
    CONTACT US

    Get in touch, no hard sell, just a brew, a biscuit and a chat.