The government will mandate the reporting and paying of income tax and class 1A national insurance contributions (NIC) on benefits-in-kind (BIK) via payroll software from April 2026.
HMRC has announced that payrolling benefits and paying class 1A NIC on BIK via payroll will be mandatory from April 2026. The aim is to reduce administrative burdens by simplifying and digitising reporting and paying tax on all employment benefits, removing the need for four million P11D returns and forms P11D(b).
While ICAEW previously recommended making it possible to payroll beneficial loans and employer-provided accommodation, it has also highlighted complexities involved in payrolling BIK.
For example, although payrolling BIK removes the need for employers to submit forms P11D for these BIK, class 1A NIC currently still needs to be reported and paid separately to HMRC using form P11D(b). The news that class 1A NIC will be payable via payroll software is potentially welcome from an administrative viewpoint, but it is currently unknown whether the due date for paying class 1A NIC will change.
Some employers currently choose to payroll some, but not all, benefits. This is because some BIK are easier to calculate on a pay period basis. ICAEW hopes that the government takes the opportunity to consult properly with stakeholders to establish how underlying BIK calculations – in particular beneficial loans and accommodation, and emergency vehicles – and payments by employees, (eg, for private use, etc), might be simplified before mandating payrolling all BIK.
It is understood that draft legislation will be published later this year.
A start date of April 2026 does not leave much time for HMRC to draft a full specification for software development and testing before implementation.
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