HMRC moves towards a fully digital era with payrolling benefits in kind 

HMRC has announced that the payrolling of benefits will be mandatory from April 2026 as part of the overall plan to move to a digital first tax authority. This follows on from the changes made during the 2022/23 reporting season whereby amendments to P11Ds had to be completed electronically rather than a ‘by paper’ option.  

Payroll benefits in kind (PBIK) was introduced on a voluntary basis only from April 2016 to report employee benefits (excluding employer-provided accommodation and beneficial loans) in real time. Currently, some employers choose to payroll some, but not all, benefits as some BIK are easier to calculate on a pay period basis.  

HMRC said it would engage with stakeholders to discuss the proposals to inform design and delivery decisions with draft legislation to be published later in the year. However, there are only two years to ensure that software is developed and tested before the reporting rules come into force which does not leave much time for HMRC to draft a full specification for software development before the roll out.  

What will this mean for business owners? 

The aim is to reduce the administrative burden for employers as it will simplify and digitise reporting and paying tax on all employment benefit without the need to submit separate P11D and P11D(b) forms at the end of the tax year.  

If you are a business owner and you provide your employees with reportable benefits, which are not reported under the current voluntary PBIK, you should consider doing so now before April 2026. 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. 

Contact us 

If you have any questions about PBIK or how to arrange putting it in place, please do not hesitate to contact Mandy Bagot or a member of the Virtual Finance team.