As part of the Autumn Budget 2024 information, the government have confirmed that from April 2026, it will be mandatory to payroll all benefits in kind except for:
- employment related loans and
- accommodation
Payrolling for these two benefits will be introduced on a voluntary basis, also from April 2026, and the government will set out the next steps on when they will be mandated in due course.
This will mean that for all other Benefits in Kind (BiKs), Income Tax and Class 1A NICs will need to be reported to HMRC via PAYE through Real Time Information (RTI) through the Full Payment Submission (FPS) from April 2026.
For the above mentioned benefits that are unable to be payrolled at this point, voluntary payrolling will be introduced for those from April 2026. The P11D and P11D(b) process will still be available for those that do not want to payroll these BiKs. The government intends to mandate these BiKs and will set out a timeline in due course
An end of year process will be introduced to amend the taxable values of any BiKs that cannot be determined during the tax year. However,the taxable values of most BiKs should be reported as accurately as possible during the tax year
For all payrolled BiKs, any corrections must be made during the year as soon as information about the taxable value of a BiK is known. If a discrepancy is found in-year, the employer must rectify their payrolled figures using the remaining Full Payment Submissions for the tax year.
The HMRC will continue to monitor the penalty position, from April 2026 to April 2027, whilst employers get used to the new process of reporting BiKs to HMRC. They recognise that there will inevitably be a period of adjustment in the first year.
It has been noted that employment related loans and accommodation would still be burdensome to payroll even with amendments made to the calculation process to determine the taxable value of these BiKs.
For this reason, forms P11D and P11D(b) for Income Tax and Class 1A NICs respectively will remain available to those who do not wish to use the voluntary payrolling option to report these BiKs. These forms will not be available to report any other BiKs.
Employers who are able to payroll these BiKs will need to register to payroll them in a similar way to how they would register to voluntarily payroll BiKs currently.
