What do you need to know?
The Payrolling Benefits in Kind scheme was set up by the UK Government in 2016 and this refers to the practice of processing employees benefits through the payroll rather than on a P11d.
A benefit in kind is goods or services that an employee receives from their employer which isn’t included in their salary or wages.You may hear these benefits referred to as a “perk” such as a company car or private health insurance.
The purpose of this scheme was to make declaring and paying tax on benefits easier, compared to the previous method of submitting P11D forms. It also removes the need for employers to complete P11Ds on behalf of employees, saving time and minimising errors.
Changes to payrolling benefits April 2026
From April 2026, payrolling benefits in kind will be made compulsory via your payroll software and this will remove the need for employers to submit a P11D at the end of the year.
This measure will help minimise the administrative burden for employers and HMRC and simplify the process of reporting and paying tax on all employment benefits.
Can I payroll my benefits before April 2026?
You can – and some companies, should strongly consider – registering early. If you would like to start payrolling benefits in kind you must register with HMRC before the start of the new tax year (5 April 2025).
Registering early will mean as an employer you are prepared ahead of this becoming mandatory and make sure you have the right processes in place.
By registering early, tax will be deducted from your employees in real time, meaning your employees’ benefits will not need to be reported on a P11d, therefore reducing the administrative burden.
If you would like to payroll benefits early, we can register with HMRC on your behalf.
Menzies can report Income Tax and NICs on BiKs on company payrolls. This means that you have time to prepare for the 2026 mandatory reporting deadline and start being compliant with your payroll from day one.
Our Payroll Bureau can manage your company’s payroll in-line with HMRC compliance, alleviating this responsibility from employers, and freeing up time to focus on your business.
Why payroll your benefits?
There are a number of reasons why payrolling your benefits could be advantageous. These include:
- Payrolling your benefits aims to simplify the administrative tasks for employers by integrating employee benefits into the monthly payroll process, eliminating the need for additional and burdensome year-end reporting.
- It reduces compliance risks, ensures accurate tax and National Insurance calculations and enables real-time reporting of taxes on benefits.
- The streamlined processing of benefits is designed for better employee understanding of tax implications, offers cash flow benefits by spreading tax deductions throughout the year, and results in cost savings through simplified year-end reporting
- Processing benefits through payroll also facilitates meeting reporting deadlines and makes it easier for employers to make changes to benefit offerings.
- Please note that you will need to apply for clearance from HMRC prior to the start of the tax year and recommend that the application is made in February at the latest.
How to register for payrolling benefits
- If you want to payroll benefits you must be registered as an employer with HMRC. Once registered you can apply online before the start of the tax year.
- Check that your employees are eligible for the benefits you plan to payroll.
- Communicate the change to your employees and let them know how the process will work.
- You must maintain accurate records of the benefit values, employee elections, and any necessary reporting documentation required by tax authorities.
- Implement the changes to your employee’s records in the payroll software to reflect their payrolled benefits.
- Employers must submit a P11D(b) before 6th July following the end of the tax year.
- If you would like assistance with registering to payroll your benefits please let us know and we can do this for you.
For more information on how to payroll your benefits, please contact the Payroll team.
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