Payrolling Benefits

From April 2026, Payrolling Benefits will be a mandatory requirement for employers. This was confirmed by the Government in the Autumn Budget announcement.

We are getting ahead of the game and implementing this for all our payroll clients as of April 2025, should they wish.

All taxable expenses or benefits you provide to your employees must be reported to HMRC. This is done online via a P11D and P11D(b) forms, due by 6^th July, following the end of the tax year in which the benefit was received.  The reporting process for BIKs will now be through the Full Payment Submission (FPS). This is the same process employers currently use to report salary and other employee details to HMRC.

What does ‘payrolling benefits’ involve?

• Employers will need to divide the cash equivalent of the BIKs they will be providing across the number of relevant pay periods for each employee.
• Should the cash equivalent value change in the year the employer must work out the revised taxable amount to payroll for the pay periods in the year that remain.
• This resulting figure will be reported on the employee’s payslip, along with their other earnings so that income tax can be deducted.

Interest free loans and living accommodation provided by the employer will not be mandatory to submit via the payroll however employers will be able to voluntarily do this from April 2026.

What does this mean for the employer?

This means that the benefits you provide to your employees will be submitted through the payroll software each pay period, and the PAYE will be deducted in Real Time rather than in arrears at the end of the year.

Employers will pay their Class 1A NIC liabilities in line with this also.

All benefit data submitted during the year must be accurate and reliable, as errors in reporting could result in penalties or have a direct impact on the net pay of your employees.

Payrolling the benefits will reduce the number of tax code changes in the year and create more accurate PAYE deductions for employees, ensuring that they are paying the right tax at the right time.

What does this mean for your employees?

Explanation of the upcoming changes, and how this will impact them, will be really important so that they are clear on how this will affect them based on their circumstances.

For example, there may be potential cash flow changes for them in the overlap period, where in the tax year the employer has begun payrolling their BIKs. This means they are paying more PAYE during the year, but they also have an adjusted tax code to pay the PAYE due on their benefit for the prior year.

For further information on payrolling benefits, and how this may impact you or your business, please do not hesitate to get in touch.

Call us: 01872 267 267

Email us: contact@whyfield.co.uk

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