HMRC is introducing significant changes to how employers report and pay tax on employee benefits in kind (BiKs). From April 2026, payrolling benefits will become mandatory for most employers, replacing the current reliance on the P11D form.
If your business is based in Kidderminster or the surrounding areas, now is the time to start preparing for these changes. This blog reviews what the current system looks like and how it's changing.
Most employers report employee benefits, such as private medical insurance, company cars and gym memberships, via a P11D form at the end of each tax year. These forms provide HMRC with a record of the benefits provided and the associated tax liability, which is then collected through the employee's tax code in future pay periods.
Employers also submit a P11D(b) form to declare and pay Class 1A National Insurance Contributions (NICs) on most benefits.
While this system works, it creates a lag between when a benefit is provided and when the tax is actually collected. It also involves a significant administrative burden at the end of the tax year, especially for employers with a growing workforce.
However, since April 2016, employers have had the option to voluntarily payroll benefits.
From 6 April 2026, the voluntary payrolling of benefits will become mandatory for most employers. This means that instead of waiting until the tax year end to report and pay tax on benefits, employers will have to include the taxable value of BiKs in their employees' pay each period, whether monthly, weekly, or otherwise.
In practical terms, tax on benefits will be deducted from the employee's pay in real time as part of the PAYE system. The need to file P11D forms for relevant BiKs will be removed, although the P11D(b) for Class 1A NICs will still be required, at least for now.
HMRC's policy paper on payrolling benefits can be read here.
The majority of taxable BiKs will need to be payrolled from April 2026. These include, but are not limited to:
BiKs, which include employment related loans or living accommodation, will be introduced voluntarily from April 2026, with HMRC set to make them mandatory at a later date, yet to be confirmed.
While the tax on benefits will be collected through payroll, Class 1A NICs will still be due annually, as they are now. Employers must continue to submit a P11D(b) at the end of the tax year to declare these NICs.
However, with benefits being processed through payroll, calculations for Class 1A NICs will become more streamlined, as payroll software will help track the taxable value of benefits throughout the year.
With just over a year to go before the April 2026 deadline, employers need to begin preparing now. Here's what you should be doing:
The move to mandatory payrolling benefits is a big change, but with the proper support, it doesn't have to be a burden. Whether you're a small business with a handful of employees or a larger operation, acting now will save time, reduce stress, and ensure you're fully compliant when the rules take effect in April 2026.
At JRMA, we're already helping businesses across Kidderminster navigate the complexities of payrolling benefits. Our experienced payroll team can:
By outsourcing your payroll to JRMA, you can focus on running your business while we handle the technical and administrative challenges of the new payroll rules.
Contact us today at 01905 796512 or by emailing info@jrma.co.uk to see how we can assist your business in transitioning to payrolling benefits.
