From April 2026, all reporting and payments of income tax and Class 1A NICs on benefits in kind (BIK) will have to be made through payroll software.
This change to how employment benefits are reported is now mandatory. HMRC has said the move was a result of building on the progress that the Government have already made in their ambition to fully digitalise any reporting of BIK.
It is part of HRMC’s plan to move to a digital tax first authority – but what do the changes mean for you?
With a tight timeframe to rollout the new changes, it is important you stay up to date on legislation updates so that your business can avoid significant penalties.
By mandating the payrolling of employee benefits, the tax processes for three million people will be simplified.
A simpler employment benefit payrolling system will also mean less people will have to contact HMRC, leading to a decrease in reporting delays.
Processing benefits through payroll mean the tax and National Insurance Contributions (NICs) will be collected in real time.
These changes mean employees are more likely to pay the correct tax due on their benefits during the year.
This will further aim to reduce the PAYE tax code errors and underpaid liabilities associated with benefits that have left many employees and employers confused.
Although we have outlined the benefits of payrolling employee benefits through payrolling software, there will undoubtedly be hurdles which you will have to face – getting the advice of a professional accountant will help you navigate this difficult process.
Payrolling BIK removes the need for employers to submit forms P11D for these BIK, but class 1A NIC currently still needs to be reported and paid separately to HMRC using form P11D(b).
Lots of challenges also still need to be addressed – these include:
Our expert team of advisers are on hand to help you with any problems you might endure, offering professional and friendly advice every step of the way.
Contact our payroll team today for more information and guidance on the payrolling of employment benefits journey.
