Payrolling Benefits in Kind – Getting ready for the changes.

If you provide benefits in kind to your employees, this is relevant to you.

What are Benefit-in-kind?

A benefit-in-kind (BiK) is a non-cash benefit provided by an employer to its employees. Typical BiKs include private medical insurance, company cars or vans, interest-free or low interest loans and living accommodation.

How are BiKs currently reported?

Under existing rules, employers report taxable benefits to HMRC either:

• on Forms P11D, or
• through voluntary payrolling of benefits.

When reporting taxable benefits on Forms P11D, the employer must prepare and submit the forms to HMRC by 6th July following the end of the tax year in which the benefits were provided.

The employee pays the tax due on the benefits by a reduction to their PAYE code number, or via their self-assessment tax return. The associated employer Class 1A National Insurance Contributions (Class 1A NIC) due on the benefit is due for payment on 19th July, annually.

Alternatively, if the employer has agreed with HMRC to voluntary payroll benefits, the tax due is collected from the employee’s pay in real-time via the payroll. The employer must still report the Class 1A NICs due to HMRC, which remain payable on 19th July.

There are complex rules for calculating taxable loans or living accommodation BiKs. These benefits cannot be reported via the payroll meaning employers must prepare a Form P11D for employees who receive these.

HMRC says these current reporting systems are administratively burdensome for employees, employers and HMRC, so has announced changes.

What’s changing?

HMRC has announced that from April 2026, it will be mandatory to report all benefits and pay Class 1A NIC via payroll.

Crowe is participating in HMRC stakeholder consultations to learn more about the proposed changes and how the complexities around loans, living accommodation and payment of Class 1A NIC will be addressed.

HMRC estimates this change will simplify the tax affairs of 3 million taxpayers and thousands of employers.

What does this mean for employers?

While the easing of administrative burdens are generally welcome, employers may want to give thought to how the changes may impact them and start planning for the changes. This could include.

• Understanding how payrolling benefits work and what your obligations are.
• Checking payroll software capabilities for the payrolling of benefits.
• Assessing your processes and adapt or implement changes to ensure you can comply with the rules.
• How the information of benefits will flow between various stakeholders e.g. HR / payroll.
• How you will manage in-year changes to benefits provided.
• Communicating with your employees about the changes.
• Managing errors to reduce the exposure to PAYE penalties.

How can Crowe help?

At Crowe, our employment tax specialists can guide you through the changes to ensure you have robust systems and policies in place that are underpinned by sound governance. We can also help you with the early adoption of voluntary payrolling benefits.

If you have would like to share your thoughts for HMRC consultation, have any concerns with the upcoming changes, or your current P11D compliance, please contact Glen Huxter or your usual Crowe contact.