The government will make the reporting and paying of Income Tax and Class 1A National Insurance Contributions (NICs) on benefits in kind via payroll software mandatory from April 2026, building on the progress already made on the government’s ambition to fully digitalise the reporting of benefits in kind. Mandation will simplify the tax affairs of 3 million people and reduce the need for them to contact HMRC.
This measure will reduce administrative burdens for thousands of employers and HMRC by simplifying and digitising the process of reporting and paying tax on all employment benefits. It will remove the need for 4 million end of year returns to be submitted to HMRC. HMRC will engage with stakeholders to discuss our proposals to inform design and delivery decisions and draft legislation will be published later in the year as part of the usual tax legislation process. HMRC will also work with industry experts to produce guidance, which will be made available in advance of 2026. Further information will be published via usual communication routes, such as through employer bulletins.
Payrolling the Income Tax due on benefits in kind is currently available to employers on a voluntary basis, with those who do not wish to payroll still able to file form P11D at the end of the year. Class 1A National Insurance contributions cannot currently be payrolled so a P11D(b) form still needs to be submitted at the end of the year. In light of the recent announcement HMRC encourages anyone who is able to begin payrolling voluntarily to do so in preparation. Agents will also be able to payroll benefits on behalf of employers from the end of April 2024.
How this will affect employers
If you provide BiKs to your employees, Income Tax and Class 1A National Insurance contributions will have to be reported and paid in real time through payroll software from 6 April 2026. The 2025-2026 tax year will be the last year that we will accept P11Ds and P11D(b)s for annual reporting of BiKs in most cases.
HMRC will help businesses to prepare for the transition by providing guidance in advance of 2026. If you wish to start payroll benefits for 2025-26, you will need to tell HMRC before April 2025 which benefits you want payrolled, or ask us for a form of ‘benefits to payroll’ and we can inform HMRC for you if we are your PAYE agent.
