The payrolling of benefits in kind was launched in April 2016 and is currently something an employer can elect to do by registering with HMRC. The payrolling of benefits in kind means that employees do not require a P11D form, but the employer is still required to complete a P11D(b) form which summarises the taxable benefits provided to employees during the year and reports the Class 1A National Insurance contributions payable by the employer.
Registering new benefits
Prior to the start of the 2025/26 tax year, employers should review the benefits that they want to payroll in that tax year. If there are any benefits that are to be payrolled for the first time, the employer will need to register to payroll those benefits before the new tax year starts on 6 April 2025. This can be done online using HMRC’s payrolling employees’ taxable benefits online service (see www.gov.uk/guidance/paying-your-employees-expenses-and-benefits-through-your-payroll).
Nature of payrolling
Where a benefit is payrolled, the taxable amount of that benefit is treated like extra salary paid to the employee in instalments with the employee’s regular salary or wage. For example, if an employee has a company car with a cash equivalent value of £4,800 and is paid monthly, the employee would be treated as if they had received extra pay of £400 each month. This is included in their gross pay for tax purposes. The tax is worked out on the total gross pay (including the payrolled benefits) and deducted from the employee’s pay.
As most taxable benefits are liable to Class 1A National Insurance rather than Class 1, the taxable amount of the payrolled benefit is not included in gross pay for National Insurance purposes. Instead, the employer must include payrolled benefits in the calculation of their Class 1A liability on form P11D(b), which must be submitted to HMRC by 6 July after the end of the tax year.
Kieran Taylor
Senior
A new approach from April 2026
HMRC have now mandated the payrolling of benefits in kind with effect from April 2026. It is worth noting that, currently, payrolling of benefits in kind is not permitted for all benefits. Currently, forms P11D are still required for employees who are provided with living accommodation and beneficial loans.
The exact details of the rule change from April 2026 will be set out very shortly.
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