HMRC have announced from April 2026 the reporting and paying income tax and NIC on benefits in kind will need to be done through the payroll. It is not yet clear if this will apply to benefits that cannot currently be payrolled (credit cards, accommodation, and loans). There are also other practical areas to be clarified, including:
Current UK tax law says that employers cannot deduct more than 50% tax from employee’s salaries, what do employers do when this blocks full payrolling for an employee?
What happens to the current requirement to for employers to notify HMRC of the Class 1A liability on employee benefits - the P11D(b)?
Will HMRC be able to change its systems to ensure that the tax code of everyone who currently has a BIK restriction is updated correctly for 2026/27?
Currently a P11D is a form that must be submitted to HMRC by an employer annually for each member of staff (including directors) that receives certain benefits and expenses considered taxable by HMRC. Based on the current information, a P11D will be required for 2023/24, 2024/25 and 2025/26.
The benefit values shown on the form enable HMRC to review the employee’s tax affairs for the relevant year to check that the correct amount of tax has been paid. It also allows them to update an individual’s tax code for the following year so that regular tax deductions will be closer to the expected overall liability.
The following list is not exhaustive but includes the types of benefits typically reported:
Where an employer chooses to ‘payroll’ the benefits of employees (if possible, as some benefits cannot currently be payrolled), i.e. tax them along with employees’ monthly/weekly pay, these benefits do not need to be recorded on a P11D form.
The forms must be submitted to HMRC by 6 July annually and, in addition, the employer is also required to complete and return the P11D(b) which calculates employer Class 1A national insurance contributions which is due on certain benefits. There are penalties for filing late or incorrect P11Ds. As of March 2023, HMRC no longer accepts paper P11D filings – all submissions must be made online.
A copy of the P11D form should also be given to the employee to enable them to complete their income tax return, review their tax deductions and/or allow them to prepare claims for tax relief.
Find out more about how our P11D software can help streamline your reporting, and enable you to file online direct to HMRC.
Caroline Harwood