‘Payrolling benefits in kind’ means that employee benefits in kind are reported to HMRC through the employer’s payroll.
Examples of employee benefits in kind are company cars and medical insurance. Employees’ tax codes are amended so that any income tax due on the benefits is paid throughout the tax year. If a benefit does not need to be included on form P11D if it has been payrolled.
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.
To payroll benefits, the employer 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. The deadline for filing the P11D(b) and paying the Class 1A NIC due is 6 July following the end of the tax year.
Originally from 6 April 2026, but delayed to 6 April 2027 to allow more time to prepare, 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.
HMRC has published an updated technical note providing more information on how employers can adapt to these changes in time for 6 April 2027.
As mentioned above, it is possible to choose to enter the regime 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 Payroll queries please email Maryann Hunter using payroll@randall-payne.co.uk or call 01242 776000.
