16 January 2024

HM Revenue and Customs (HMRC) has released a tax simplification update confirming that the payrolling of benefits will become mandatory from April 2026.

The current process allows employers to either submit P11D to report the employees benefits for taxation purposes or register to payroll benefits, allowing the benefits to be taxed in real time through PAYE.

Employers can currently payroll all benefits with the exception of:

  • employer provided living accommodation
  • interest free and low interest (beneficial) loans

Clarification will be required on how these benefits will be taxed as part of the changes.

Currently the submission of the P11D(b) is still a requirement to report the liability of the Class 1A National Insurance contributions (NICs), even if the benefits are taxed through the payroll. The HMRC update outlines that the reporting and paying of Class 1A NICs will also move to be processed via the payroll software.

The HMRC website has full details of the current process.

This represents a significant shift in how benefits are processed, the input of payroll professionals will be key to the successful implementation of these changes. Watch this space as the CIPP policy team will be wanting your feedback, ideas, and thoughts on the proposed changes as more information becomes available.

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