Payrolling of Benefits in Kind to Become Mandatory from April 2026

The reporting and paying of income tax and Class 1A national insurance contributions on benefits in kind is to be made mandatory via payroll software from April 2026, HMRC have confirmed.

This is following the changes made during the 2022/23 reporting season which meant amendments to P11Ds had to be completed electronically rather than on paper.

The tax authority said the mandating of the payrolling benefits in kind (PBIK) is designed to reduce the administration burden for both employers and HMRC, and is estimated to remove the need for four million P11D(b)s to be submitted each year.

Rohit Ghai of accountancy and consulting firm Azets said: “PBIK was introduced on a voluntary basis from April 2016 for reporting employee benefits in real time, excluding accommodation provided by the employer and beneficial loans. Employers who have taken up the opportunity to PBIK have reduced the significant administrative burden in reporting employee benefits through the P11D regime.

“With the current PBIK arrangements, there is no provision for the Class 1A National Insurance that arises on the benefit in kind to be reported via the payroll in real time. Employers are still required to quantify the Class 1A on the form P11D(b), which should be submitted by the 6 July following the tax year end and the liability paid by the 19 July.”

He added that employers who provide staff/directors with reportable benefits, which are not reported under the current voluntary PBIK, should consider doing so now before the mandatory regime commences. Although it is too late to payroll benefits provided to employees in the current 2023/24 tax year, there is still time to apply to HMRC to payroll benefits for the forthcoming 2024/25 tax year, provided you register by 5 April 2024.

Ghai said: “Moving to PBIK now should reduce the burden of P11D reporting for your organisation and reduce the risk of failing to report benefits correctly once it becomes mandatory on the 6 April 2026.”

“Moving to PBIK now should reduce the burden of P11D reporting for your organisation and reduce the risk of failing to report benefits correctly once it becomes mandatory on the 6 April 2026.”
Rohit Ghai, Azets