Where a business is required to inform HM Revenue & Customs (HMRC) about an employee's benefits in kind (BIK), they must report these on either a P11D or by registering to payroll benefits, allowing the benefits to be taxed in real-time through PAYE.
Currently, the payrolling of BIKs is voluntary with many employers opting to submit annual P11Ds each year. However, HMRC has now released a tax simplification update confirming that the payrolling of benefits will be mandatory from 6 April 2026.
At present, all benefits can be payrolled with the exception of:
- Employer-provided living accommodation
- Interest-free or beneficial loans
No guidance has yet been given on how these will be taxed under the new rules.
Under the current process, regardless of whether the benefits are payrolled or reported on a P11D, a P11D(b) still needs to be submitted each year to notify HMRC of the Class1A Employers National Insurance (NICs) due on the BIKs. The HMRC update also confirms that the reporting of Class1A NICs will also be submitted through payroll.
Further details of how you can register to report BIKs through payroll voluntarily can be found below:
https://www.gov.uk/guidance/payrolling-tax-employees-benefits-and-expenses-through-your-payroll
As of May 2024, HMRC is now accepting applications from agents to be able to payroll benefits from 6 April 2025.
If you require further information on how to report and tax benefits, please get in touch with our tax team on 01254 688100.