Benefits in kind will need to be included on the submission which is sent to HMRC on or before each pay day so that the PAYE system automatically charges the right amount of tax. 

Employers will no longer have the option to choose which benefits they can payroll.  This will do away with the P11D for the employees  However, currently the P11D is used to report Class 1a National Insurance  due from the employer on benefits in kind even if they payrolled these. This may continue after payrolling becomes mandatory until an alternative process is found.

Have you decided how you will communicate payrolled benefits to staff?

Employers must notify employees that benefits will now be taxed through the payroll. Employees should receive a letter explaining how payrolling of benefits will affect them. New employees should also receive this. Details should include:

• the benefits that have been payrolled in the tax year
• the cash equivalent of each benefit that has been payrolled in the tax year.

Will some employees be double taxed?

Employees who complete a self-assessment tax return, will need these details to report the total amount of PAYE income and the benefits received on the Employment Page of the return. Because the taxable value of the benefit has been included in the total taxable pay figure on the P60 the payrolled benefit values should not be reported separately on the self-assessment form.

Another instance that might occur is when the employee is paying  for an underpayment from the previous year. This often happens on benefits reported on P11D during the second year as it is not submitted until 6 July after the year the benefit started. This should only be the case for the first year of payrolling benefits until the appropriate amount of tax has been paid.

What should employers be doing now?

• Start planning early about how to have accurate data in real time to ensure the payroll is correct.
• Consider whether any software can help calculate the benefit in kind amounts and track the breakdown.
• Monitor developments on any revised legislation and guidance.
• Consider starting payrolling benefits in kind from April 2025 ahead of mandating in April 2026

Disclaimer - The purpose of this is to give general information on the subject matter presented and this is not to be deemed as advice. This is based on the current government legislation and may change at any time in the future.

Fidelius Employee Benefits is a trading name of Fidelius Ltd. Fidelius Ltd is authorised and regulated by the Financial Conduct Authority. Our FCA reference is 188615. Registered No. 03658809 ENGLAND. Registered Office: No.1 Bath Quays, 1 Foundry Lane, Bath, BA2 3GZ.

https://www.fidelius.co.uk/employee-benefits