Further to the previous Government announcement that the mandatory payrolling of benefits will commence from 6 April 2026, preliminary information has been provided following the Autumn Budget. This in part clarifies that, at least, initially beneficial loans (including director’s overdrawn loan accounts) and living accommodation will not be part of the mandatory payrolling of benefits in kind.

All other benefits in kind will need to be processed through the payroll in real time from 2026/27.

A revised form P11D for reporting beneficial loans and living accommodation. This may also extend to any amendments that were not captured through the payroll.

Current position

Currently, employers are required to report the benefits in kind they provide to their employees on a form P11D, which needs to be submitted to HMRC by 6 July each year, following the end of the tax year. However, employers can voluntarily payroll the benefits they provide to employees with the two exceptions referred to above.

The voluntary approach

Under the current ‘voluntary’ approach, employers are required to register online with HMRC (before the beginning of the tax year in which payrolling is going to first apply), stating what benefits are going to be subjected to payrolling and the employees to whom this will relate. For example, this could be whether it will apply to an employee at a particular location. Where payrolling of benefits is applied, the Income Tax due is collected in ‘real time’ through the payroll, based on their taxable value, which may be estimated. However, HMRC will no longer make any adjustments to the employee’s PAYE code number.

National Insurance (NI)

Although forms P11D will no longer be submitted to HMRC, there is still a requirement to file a form P11D(b), summarising the value of the benefits provided and to pay the Class 1A NI by 19 July (21 July where payment is made via BACS). This will continue until the mandatory basis comes into effect.

This basis will continue to be the case until April 2026.

Employee statement

Where the voluntary of payrolling of benefits is applied, employers are required to provide employees with a statement of the taxable benefits provided during the year. The statement must be provided by 1 June following the end of the tax year.

Planning for Mandatory payrolling of benefits from April 2026

Whilst we are waiting for the full draft legislation, limited technical guidance and HMRC’s intentions have been published following the Budget. Based on experiences where clients voluntarily payrolled benefits, employers will need to consider the following:

• Determining the nature of the benefits you will provide.
• The changes that need to be made to your policies and procedures.
• Streamlining communication with your benefit providers, for example, medical insurance company, your payroll provider, and internally, between one department and another.
• How information is shared and communicated with employees.
• The impact on staff retention and recruitment.

It is important that you start planning now to ensure you will meet the challenge of moving across to payrolling of benefits without any significant disruption to your business.

NI under Mandatory Payrolling of Benefits

Once Mandatory payrolling takes effect Class 1A NI, will be payable each pay period (typically on a monthly basis) based on the value of the benefits in kind processed through the payroll.

How can HaysMac help you prepare?

Whether you are currently registered with HMRC for payrolling of benefits or not, you will need to be ready to start operating the payrolling of benefit in kind from April 2026.

There are many steps which need to be considered, starting with identifying the taxable benefits you provide, including any new benefits which are going to be on-boarded by April 2026. Some may be obvious such as medical insurance or company cars, but how will you identify complex benefits, such as relocation costs, which may not be provided regularly and to the wider workforce.

We can help you establish new policies, procedures and processes now including how you will liaise with all relevant third parties, payroll provider and your employees. We can help you:

• Identify the benefits which need to be payrolled.
• Determine the value of the benefits provided which will be payrolled.
• Ensure details of the benefits are correctly reported to your payroll provider or loaded into your payroll software.
• Prepare any staff communications

Starting early

It may be worthwhile considering starting to payroll benefits in kind before April 2026.  Doing so will put you ahead of the game and reduce any issues with the information you will need from your benefit providers and assisting employees manage their tax codes.

Where an employer decides to voluntarily register for the payrolling of benefits, with effect from April 2025, the current system of completing annual forms P11D for most benefits in kind (BiK), will instead be replaced by monthly reporting through payroll. Employers must ensure they are prepared for this significant change, as it will require changing the systems and procedures that are currently in place, to ensure that the correct information is reported as part of their payroll.

Why should I start a year earlier?

We anticipate that all benefits and service providers will be inundated with information requests ahead of 6 April 2026, which could create challenges for employers when meeting their real time reporting obligations.

Registering a year ahead of schedule will ensure a smoother interaction for all stakeholders, including HR teams, payroll, benefits providers and most importantly, employees.

The change should not be underestimated and will require a well-structured plan to help ensure that employers are fully prepared for the impact of the mandatory basis and to ensure that:

• Payroll providers have sufficient time to transition across to the payrolling of benefits.
• Data is obtained from benefit providers.
• Good quality staff communications are provided.
• Systems are in place to help ensure the valuation of the taxable benefits provided is updated regularly.

The following are examples of the issues that need to be carefully considered, when ensuring a smooth transition to the payrolling of benefits:

• Payroll – what changes need to be made to the provision of information so that benefits can be successfully processed. Please note that not all payroll providers currently have the facility to payroll benefits.
• Employee communications – how can these changes be best communicated to employees?
• No form P11D – while P11Ds will no longer generally be submitted to HMRC, employers are still required to provide employees with details of the benefits provided and the value of those benefits – how can this be done successfully?
• Data gathering – under the new changes, employers will need to review the value and provision of benefits in real time. This will require the careful tracking of leavers and joiners as well as variations of cover, such as for medical or dental insurance.

At HaysMac, our Employment Taxes team are on hand to help you manage the move across to payrolling of benefits. For further information, please contact Jo Hennessy, Employment Taxes Senior Manager or Kirsty Rose, Employment Taxes, Assistant Manager