Date18 Jan 2024
On January 16th, HMRC published its plans to fully digitise the reporting of employee benefits in kind.
HMRC have confirmed that they will mandate the reporting and paying of Income Tax and Class 1A National Insurance on benefits in kind via payroll from April 2026. This is following the changes made during the 2022/23 reporting season whereby amendments to P11Ds had to be completed electronically as opposed to the traditional paper route.
The mandating of the payrolling benefits in kind (PBIK) aims to reduce the administration burden for employers and HMRC, and is estimated to remove the need for 4 million P11D(b)s to be submitted each year.
PBIK was introduced on a voluntary basis from April 2016 for reporting employee benefits in real time, excluding employer provided accommodation and beneficial loans. Employers who have taken up the opportunity to PBIK have reduced the significant administrative burden in reporting employee benefits through the P11D regime.
With the current PBIK arrangements, there is no provision for the Class 1A National Insurance that arises on the benefit in kind to be reported via the payroll in real time. Employers are still required to quantify the Class 1A on the form P11D(b), which should be submitted by the 6 July following the tax year end and the liability paid by the 19 July.
The proposed mandatory PBIK will include the reporting and charging of Class 1A via the payroll and remove the requirement for the P11D(b) to be completed as set out above, unless any benefits which cannot currently be reported via PBIK remain excluded from the new mandatory reporting regime. Once the treatment of the excluded benefits under the new mandatory scheme is confirmed, we will issue an update.
If you provide your employees/directors with reportable benefits, which are not reported under the current voluntary PBIK, you should consider doing so now before the mandatory regime commences. Although it is too late to payroll benefits provided to employees in the current 2023/24 tax year, there is still time to apply to HMRC to payroll benefits for the forthcoming 2024/25 tax year, provided you register by 5 April 2024.
Moving to PBIK now should reduce the burden of P11D reporting for your organisation and reduce the risk of failing to report benefits correctly once it becomes mandatory on the 6 April 2026.