Are you ready for payrolling employee benefits?
From 6 April 2025, businesses will have the option to payroll employee benefits and expenses rather than reporting them via a P11D.
This change means that tax on benefits can be collected in real time through payroll, reducing the risk of underpayments or unexpected tax bills for employees.
What is payrolling benefits and why does it matter?
Payrolling benefits allows businesses to deduct tax on benefits and expenses directly through payroll, rather than relying on HM Revenue & Customs (HMRC) to adjust an employee’s tax code later.
This provides greater accuracy and transparency for both employers and employees.
However, businesses must register with HMRC before the start of the tax year (by 5 April 2025) to begin using this system.
Key steps to take now
To ensure your business is ready:
- Register with HMRC – You can sign up for the payrolling benefits and expenses service via your Government Gateway account.
- Check your payroll software – It must be able to calculate tax on benefits and expenses each pay period.
- Ensure employee data is up to date – This helps avoid errors in tax calculations.
- Communicate with employees – As P11Ds will no longer be issued for payrolled benefits, employees must receive a letter detailing their benefits and tax treatment.
- Prepare for Class 1A National Insurance contributions – You may still need to submit a P11D(b) form and pay employer National Insurance on certain benefits.
Contact us today to find out how we can support your payroll function and make the transition stress-free.