Payrolling benefits in kind allows employers to report benefits such as company cars or medical insurance directly through payroll, with income tax on these benefits collected over the course of the tax year via adjustments to employees’ tax codes. When a benefit is payrolled, it does not need to be included on form P11D.

However, certain benefits, such as employer-provided living accommodation and beneficial (interest-free or low-interest) loans, cannot be payrolled and must still be reported on the P11D.

Employers wishing to payroll benefits must register with HMRC before the start of the tax year in which they intend to begin.

Whether benefits are reported through payroll or via a P11D, employers must also include them on form P11D(b) and pay Class 1A National Insurance Contributions on the total taxable value of all benefits provided to employees. The deadline for filing form P11D(b) and paying the Class 1A NIC is 6 July following the end of the tax year.

Looking ahead, from 6 April 2026, payrolling benefits in kind will become mandatory for all employers for all benefits except beneficial loans and living accommodation. These excluded benefits can still be payrolled voluntarily. For employers keen to adopt the regime sooner, payrolling benefits will be available on a voluntary basis from 6 April 2025.

This change aims to simplify processes and bring greater clarity for employers and employees alike. If you are considering payrolling benefits early or have any questions about the upcoming changes, please feel free to contact us for guidance.