Payrolling benefits in kind is currently voluntary. If an employer currently wishes to payroll benefits, they must register online before the beginning of the tax year they want to include them on the payroll. This may mean that the employer does not have to prepare P11D forms at the end of the tax year. However, currently certain benefits cannot be payrolled. Accommodation and beneficial loan benefits must be reported on the P11D form meaning if an employer has either of these benefits then they may still have to prepare a P11D as well as payrolling other benefits.
Under the new rules from 6 April 2026, with the exception of accommodation and beneficial loans, it will be mandatory for employers to payroll all benefits. The benefits will be included on employees’ payslips and the tax and Class 1A NIC will be collected in real time. The employer should include the cash equivalent of the benefit in an employees pay.  This will mean benefits will no longer be required to be reported on self-assessment tax returns as the tax and national insurance will already have been paid. These new rules also mean that employers may no longer need to prepare and submit forms P11D and P11D(b). However, if you have accommodation and/or beneficial loan benefits then this may still be a requirement.
Although it is to be compulsory to payroll non-cash benefits from April 2026, if an employer wishes to payroll accommodation and beneficial loans, they will need to voluntary register online before the beginning of the tax year if they wish to include them.
Payrolling benefits allows employees to pay tax on their benefits in real time and should therefore keep changes to tax codes to a minimum.
This will be a big change for employers and they will need to ensure their payroll software is equipped to handle integrating benefits to their system.
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