“Payrolling benefits in kind” refers to the process where employee benefits (such as company cars or medical insurance) are reported to HMRC through the employer’s payroll system. This allows the employee’s tax code to be adjusted, so any income tax due on these benefits is paid throughout the tax year. If a benefit is payrolled, it doesn’t need to be reported on the P11D form.
Payrolling is available for all benefits in kind, with two exceptions: employer-provided living accommodation and beneficial loans (such as interest-free or low-interest loans). These still need to be reported on the P11D.
To start payrolling benefits, an employer must register with HMRC before the beginning of the tax year in which they plan to implement it.
Regardless of whether benefits are payrolled or reported on a P11D, employers must still include them in the P11D(b) summary form and pay Class 1A National Insurance Contributions on the total taxable value of the benefits across all employees. The P11D(b) form must be filed, and Class 1A NICs paid, by 6 July following the end of the tax year.
Starting on 6 April 2026, payrolling benefits in kind will become mandatory for all employers for most benefits, except for beneficial loans and living accommodation. However, employers will still have the option to include these two benefits in the payroll system voluntarily. The goal is to simplify the process for both employers and employees. Employers can also choose to adopt the payrolling system one year earlier, beginning on 6 April 2025, if they wish. If you’re considering this option or have questions about future obligations, feel free to get in touch with us for further guidance.