HM Revenue and Customs (HMRC) has already confirmed that they would like to see the end of submissions of forms P11D. The last Autumn Statement has confirmed that payrolling benefits will go ahead in April 2026. So how are you planning for payrolling benefits?
Currently, there are two ways you can report employee benefits:
- You can complete the online forms P11d using software by 6th July.
- Or you can payroll the benefits.
Once you complete the forms P11d, you as an employer can pay over the Class 1A National Insurance (NIC) in July each year. Employees must declare the benefits in their self-assessment tax return (if they prepare one) and receive a revised PAYE code.
This can often confuse people, especially if there is an underpayment of tax due to the change in benefits. The purpose of revising the tax code is to ensure that tax on the benefits is collected each month.
Handling benefits via the payroll will be a lot easier! Well, at least once, we all get used to it. You incorporate the benefits into your monthly payroll process, allowing employees to pay taxes in real-time. That sounds great, right? Just keep in mind that, for now, any loans (like director’s loan accounts) or living accommodation can’t be reported yet.
HMRC has stated that it will issue instructions before April 2026 on handling these two anomalies.
The other persistent challenge has been the requirement to fill out form P11d(b) to remit the Class 1A NIC associated with benefits. As a result of these two issues, many employers have avoided payrolling benefits.
Again, HMRC has suggested that Class 1A NIC be paid via the payroll software, removing the need for P11D(b). This means software houses have about a year to offer a solution.
What should you do about planning for payrolling benefits
Well, this depends entirely on you. You can do so if you want to voluntarily register for payrolling the benefits from April 2025, a year before it becomes mandatory. It will mean you are organised and familiar with the process before it is forced upon you.
Registering early allows for a smoother learning experience and provides additional time for adjustments. However, it may also require implementing both systems to pay the Class 1A NIC and accounting for benefits stemming from loans or accommodation. This aspect has deterred many in the past.
We understand that not everyone will feel daring. Your perspective may vary depending on your data and the software in use.
There is no right answer here. The correct answer is to be aware of the changes and start planning.
You need to look at your data flow; how do you get the data for the benefits? For example, if you are offering private medical to your employees:
- Do you receive the invoice each month?
- Who receives the invoice and can it be passed to Payoll seamlessly?
- When do you receive the invoice? Is it in time for the payroll run?
- How quickly are any amendments sent to the scheme operators?
- Is your payroll software ready for processing the benefits?
- How will you communicate the change to your employees and ensure that they are not taxed twice, i.e. once through the payroll by you and by HMRC via the adjusted PAYE code?
How can Myers Clark help with planning for payrolling benefits
As payroll agents, our mission is to help our clients have the best approach. We have some clients for whom we process the benefits each month. This is because we are doing their bookkeeping and have access to their data.
Moreover, the clients wanted a seamless experience for their employees regarding PAYE tax. That means fewer adjustments to tax codes. It has worked well.
For these clients, it will mean minimum disruption and complete compliance in April 2026.
However, as we said before, there is no one answer that fits all. We suggest that you talk to your accountant or payroll bureau to see the best approach for your situation.
Next Steps
You don’t have much time if you want to payroll benefits next tax year. You must register online before the end of the tax year, i.e. 5th April. If you are not sure what to do, then contact us.
Otherwise, you should start reviewing your systems and putting a plan together for April 2026. We will be happy to help you do this. We can look at your data flow, help with your communications with the team and even process the payroll with the benefits.
If you are working with us, speak to your normal manager first. If you are not already working with us, here’s how we work.