Payrolling Benefits – What Employers Need to Know for 2026

HMRC is making major changes to how employee benefits are reported. From April 2026, most benefits-in-kind (BIKs) must be payrolled, meaning they will be taxed monthly via PAYE instead of being reported on a P11D.

This shift aims to simplify compliance but will require employers to adjust their payroll processes.

 What’s Changing from April 2026?

 Mandatory Payrolling of Benefits

Currently, businesses can voluntarily payroll benefits, meaning tax is deducted via PAYE each month instead of being reported on a P11D at year-end. However, from April 2026, this will become mandatory for most benefits.

 Key Changes:

Most benefits must be taxed monthly via payroll software (e.g., private medical insurance, company cars).
Class 1A National Insurance Contributions (NICs) on benefits will also be reported monthly and paid through PAYE.
No more P11Ds for payrolled benefits – reducing year-end admin.
P46 (Car) forms will be removed, as car benefits will be reported in real-time via payroll software.

 Exceptions – Loan & Accommodation Benefits

• Accommodation and loan benefits will remain optional for payroll from April 2026.
• Employers can still use modified P11D forms to report these benefits.
• HMRC hasn’t yet decided when these benefits will become mandatory for payroll reporting.

 What This Means for Employers

Payroll software must be updated to ensure benefits are correctly reported in real-time.
More frequent NICs payments – rather than paying Class 1A NICs once a year, employers will pay monthly.
Greater accuracy required – HMRC expects benefits to be reported as accurately as possible during the tax year.
End-of-year adjustments will be available for benefits where taxable values can’t be determined in real-time.

 What Should Employers Do Now?

Review which benefits you currently report on P11Ds – and assess how they will be handled under payrolling.
Ensure your payroll software is capable of payrolling benefits before April 2026.
Plan for increased NICs payments – as Class 1A NICs will be due monthly instead of annually.
Decide how to handle accommodation & loan benefits – will you payroll them voluntarily or continue using P11Ds?

We’re Here to Help!
At Merranti Accounting, we can:
Assess how these changes impact your PAYE obligations.
Help you transition smoothly to payrolling benefits.
Ensure your payroll system is fully compliant before 2026.

Contact us today to start preparing for these changes and avoid last-minute compliance issues!

Find more from the spring news letter here