Employers warned payrolling of benefits is to become mandatory

Expert accountants and business advisers at Whitley Stimpson are forewarning employers that they will be required to report and pay income tax and Class 1A National Insurance Contributions (NIC) on benefits in kind through payroll.

The change which is set to start from April 2026 aims to simplify and modernise the tax system. 

Tracy Gill, Payroll Manager at Whitley Stimpson Accountants and Business Advisors, highlights the key considerations for employers.

Currently, taxable benefits and expenses must be reported to HMRC on Forms P11D and P11D(b) by 6 July following the end of the tax year. However, with HMRC’s agreement, employers can choose to operate income tax withholding on most benefits through payroll, reducing the reporting burden.

HMRC confirmed ministers have requested this change doesn’t go out to public consultation in the traditional way we’re all accustomed to. The upcoming change will mandate payrolling benefits in kind from April 2026. HMRC will consult stakeholders on the details, and draft legislation will be published for consultation. 

Tracy explains: “If you are an employer that provides taxable benefits to your employees, you will need to eventually transition to payrolling these benefits. While an awareness is only required at this point, employers should start considering the implications of mandatory payrolling on their systems and processes, including data management, increased PAYE risk, employee impact, communication, payroll software support, and process impact.

“For assistance with navigating these changes, we have a dedicated team available to assist you with the preparation of P11Ds up to the point of the change and assist you with the transition and throughout the new payrolling mandate.”

Whitley Stimpson works closely with clients to improve efficiencies and suggest ways of upgrading their systems to limit payroll costs. Its six-strong payroll team supports 467 payroll clients in businesses ranging from one to 250 employees.

If your business requires help with its payroll process, contact the Whitley Stimpson payroll experts or for further information watch

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