Are you aware that from 6 April 2026, employee Benefits in Kind (BIK) will have to go through your payroll?
What does it mean for you?
The formal payrolling of benefits allows employers to subject the taxable value of the BIK to tax via the payroll during the tax year. This can include benefits such as private medical insurance and company cars.
Registration is currently voluntary, but this will become mandatory from April 2026. This must be made online before the start of the tax year in which the employer wants to start payrolling benefits. If the deadline is missed, employers cannot formally payroll benefits until the beginning of the following tax year.
All taxable benefits can potentially be payrolled, apart from employer provided living accommodation and low or interest free employer provided loans.
What is your responsibility as an employer?
Communication with employees is important. Registered employers must notify employees that their benefits are being payrolled and what it means for them. Once payrolling has started employers must provide employees with specific details about the benefits that have been payrolled by 1 June following each tax year.
Employers should consider how payrolling benefits will affect them and their employees, and what both parties could gain from doing this. Before registering, employers should consider:
- what benefits they can and cannot payroll; and
- the processes and procedures which will invariably be required to payroll benefits efficiently and correctly; and
- whether staff involved in the operation of the payroll will require training.
What will the advantages be of payrolling benefits?
- The requirement to complete annual forms P11D for formally payrolled benefits is removed, reducing end of tax year administration.
- Employees are more likely to pay the correct tax due on their benefits during the tax year.
- PAYE tax code errors and underpaid tax liabilities associated with benefits are less likely to occur if payrolling of benefits is done correctly.
The value of payrolled benefits is calculated in the same way as when reported on a P11D. This means that the Optional Remuneration Arrangement (‘OpRA’) rules must still be considered where payrolled benefits are provided under salary sacrifice or with the option of a cash alternative.
The notional value of the annual benefit is then proportionately taxed via the payroll based on the number of pay days employees have during the tax year. For example, if an employer pays employees monthly, the taxable notional value of the benefit to be included in each pay period will be the annual value of the benefit divided by 12.
Payment of Class 1A National Insurance
Employers who have formally registered to payroll benefits must still calculate and pay the Class 1A NIC due on chargeable benefits provided and submit an annual form P11D(b).
A Class 1A NIC liability generally arises whether the employer is payrolling the benefits and/or reporting benefits to HMRC on a form P11D. The P11D(b) must be submitted by 6 July, and the Class 1A NIC paid by 19 July (22 July if paying electronically), following the tax year.
What now?
The payroll of benefits can be a big change for you and/or your business. At the moment HMRC are making this mandatory from 6 April 2026. Therefore we would advise you act as quickly as possible and understand the impact this can have on you and/or your business.
At NRB our specialists have experience in helping employers meeting their tax and NIC obligations in respect of employee BIKs.
To find out more about Mandating the payrolling of benefits in kind, click here.
Further Information
If you need any further information, please contact tax@nrb.co.uk or payroll@nrb.co.uk
Click here to find out more about our Payroll services.
