The government announced various measures on 16 January 2024 that support its ambition to simplify and modernise the tax system. One of which was payrolling benefits. The reporting and paying of Income Tax and Class 1A National Insurance Contributions (NICs) on benefits in kind via payroll software will be mandatory from April 2026.

The current process allows employers a choice to either submit P11Ds to report the employee's benefits or register for payroll benefits. This allows the benefits to be taxed in real-time. Although you are still required to submit a P11D(b) to report the liability of the Class 1A National Insurance contributions (NICs).

All benefits can currently be payrolled, with the exception of; Employer-provided living accommodation and beneficial loans.

Further clarification on how these will be processed in the future will need to be provided.

This new measure will reduce administrative burdens for thousands of employers. It will remove the need for 4 million end-of-year returns to be submitted to HMRC.

Draft legislation will be published later in the year as part of the usual tax legislation process. HMRC will also work with industry experts to produce guidance, which will be made available in advance of 2026.

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Payroll Manager at Queen's University Belfast

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