Proposed Changes to Payrolling Benefits in Kind

HMRC has declared that as of April 2026, it will be obligatory to report and pay income tax and Class 1A National Insurance contributions (NIC) on benefits in kind through payroll.

Key Points of the Announcement:

• Registration for payrolling benefits in kind (BIK) must be completed before the 5th of April for the relevant tax year. It is advisable to do this promptly to allow HMRC sufficient time to adjust employees' tax codes for the upcoming tax year.

• Employees' income tax on these benefits will be collected monthly in real-time through payroll, instead of through a tax code adjustment the following year.

• Almost all benefits can be included in the payroll, except living accommodation, loans, and credit cards/vouchers. Common benefits include company cars, fuel, and medical/healthcare.

• Including company car benefits in the payroll eliminates the need for a P46 (Car) form.

• Although P11D(B) forms are still necessary, payments for Class 1A are due by the 22nd of July if paid online in the subsequent tax year (or by the 19th of July if paid by cheque).

The Government aims to simplify the tax system, promote fairness, and encourage growth. They anticipate that this change will streamline the tax affairs of 3 million individuals, reduce the need for contacting HMRC, and ease administrative burdens for numerous employers and HMRC by digitizing the reporting and tax payment process for all employment benefits. Additionally, this measure will eliminate the requirement for 4 million end-of-year returns to be submitted to HMRC.