Government announces the mandatory payrolling of benefits from April 2026

23rd January 2024

After several ‘false dawns’, HMRC has recently announced that the payrolling of benefits will become mandatory from April 2026.

Current position

Currently, employers are required to report the benefits in kind they provide to their employees on a form P11D, which needs to be submitted to HMRC by 6 July each year, following the end of the tax year. However, employers can voluntarily payroll the benefits they provide to employees with two exceptions:

  • Interest free loans including director’s overdrawn loan accounts; and
  • Employer provided living accommodation.

Under the current ‘voluntary’ approach, employers are required to register online with HMRC (before the beginning of the tax year in which payrolling is going to first apply), stating what benefits are going to be subjected to payrolling and the employees to whom this will relate. For example, this could be whether it will apply to an employee at a particular location. Where payrolling of benefits is applied, the Income Tax due is collected in ‘real time’ through the payroll, based on their taxable value, which may be estimated. However, HMRC will no longer make any adjustments to the employee’s PAYE code number.

Even though forms P11D will no longer be submitted to HMRC, there is still the need to file a form P11D(b), summarising the value of the benefits provided and to pay the Class 1A National Insurance by 19 July (21 July where payment is made via BACS). By 1 June following the end of the tax year, employers are required to provide employees with a statement of the taxable benefits provided during the year.

Mandatory payrolling of benefits from April 2026

Whilst we are waiting for the draft legislation, which is due to be published later this year, we are aware that advanced planning will help manage everyone’s expectations. Based on experiences where clients voluntarily payrolled benefits, employers will need to consider the following:

  • Determining the nature of the benefits you will provide.
  • The changes that need to be made to your processes.
  • The changes that need to be made to your policies and procedures.
  • How information is shared with employees.
  • The impact on staff retention and recruitment.

It is important that you plan to ensure you will meet the challenge of moving across to payrolling of benefits without any significant disruption to the business.

Please contact Nick Bustin, Employment Tax Director, to discuss matters further.

Nick Bustin

Employment Tax Director
+44 20 7969 5578
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