HM Revenue & Customs (HMRC) has recently published its plans to fully complete the digitisation of reporting of employee Benefits in kind.

Payrolling benefits in kind (PBIK) is designed to remove the need for four million P11Ds and P11D(b)s to be submitted each year and reducing the administrative burden for both employers and HMRC. HMRC have confirmed that they will make the reporting and paying of Income Tax and Class 1A National Insurance Contributions on benefits in kind via payroll mandatory from April 2026.

Changes were made during 2022/23 to the system for P11D amendments, meaning they had to be completed electronically as opposed to via a hard copy paper route.

What is payrolling benefits in kind?

PBIK isn’t new; it was originally introduced by HMRC on a voluntary basis in April 2016 for reporting employee benefits in real time.

With the current PBIK arrangements, Class 1A National Insurance Contributions (NICs) that arise on the benefit in kind still have to be reported on form P11D(b) by 6 July following the tax year end and paid by 19 July.

The new PBIK rules will include the reporting and charging of Class 1A NIC via the payroll. This removes the need for reporting via the P11D(b) form.

Many companies have begun using PBIK to reduce administration of employee benefits reporting, for example in reporting private medical benefits, however based on current rules PBIK is not a suitable route for all categories of benefit.

Currently employer provided living accommodation and beneficial loans are excluded from PBIK reporting and it’s not clear yet whether this will continue or whether these will be included in PBIK in the future.

As these changes are not due to be implemented until 2026, HMRC are still discussing the final design and delivery of the draft legislation and will decide if employer provided accommodation and beneficial loans are included in the new PBIK regime. They will be working on this and will produce further detailed guidance in advance of the 2026 launch.

How should you prepare for payrolling of benefits changes?

If you have not yet moved to the current voluntary PBIK, it is worth beginning to consider this now in readiness for the mandatory rules coming into force. This may require an update or implementation of new payroll systems.

If you provide your employees with reportable benefits and are not yet reporting them under the voluntary PBIK, it may be worth including these now before the mandatory regime comes into force.

You must register for PBIK by 5 April 2024 to HMRC to payroll benefits for the 2024/25 tax year.

Conclusion

Mandatory payrolling benefits in kind introduces considerable legislative change to the reporting of taxable benefits provided to employees.

The proposed changes from 6 April 2026 will introduce mandatory payrolling for all companies, so it’s worth preparing for these changes now.

Successful implementation and moving to payrolled benefits could reduce administrative burden and save your company time and money on P11D reporting. However, it may require some companies to review their payroll software and systems in preparation for the changes. Alternatively, now may be the time to consider outsourcing your payroll.

Here at Barnes Roffe our payroll professionals perform a critical and real time service to our clients where weekly, monthly and annual deadlines exist. This is not only the running of the payroll itself, but also in the filing of real-time reports with HMRC.

Contact us today for more help and advice on Payrolling benefits in kind or outsourcing your payroll to Barnes Roffe.

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