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 most 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.
Payrolling the cash equivalent value for a BiK
Employers will divide the cash equivalent of the BIKs provided across the number of relevant pay periods for each employee. The resulting figure can then be reported alongside employee earnings in each pay period so that Income Tax due on the benefit is deducted from the employee’s pay on their payslip.
If a change to the cash equivalent occurs in year, the employer must work out the revised taxable amount to payroll for the remaining pay periods for that tax year.
End of year process
For all payrolled BiKs, employers must ensure that reported taxable values for BiKs are as accurate as possible. 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.
Reporting more data than now
HMRC are expecting more data to be reported than is currently required through the voluntary system, both to reflect the introduction of Class 1A NICs on BiKs reporting in the payroll system and to provide a more granular breakdown of the BiKs being reported through payroll.
HMRC will publish technical specifications for software developers and providers during mid to late 2025 which are to detail precisely which additional data items will be added to RTI.
Opinion
April 2026 will come quicker than you would think. This new Payrolling and real time Class 1A obligation is likely to be different than the current voluntary arrangement.
Payroll software will need to be readied to accept and report the new data. But equally, employers will need to look at the end to end processes in the application of the benefits, how they are to be assessed and handled and having all impacted areas and third parties aligned with plans for readiness.
But so will all the third party providers need to be readied to enable relevant up front calculations and application to take place,
Although there is a short reprieve for a mini P11D to continue for loans and accommodation, the full blown P11D is becoming redundant.
PAYadvice.UK 31/10/202
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