Taxing employee benefits and expenses through your payroll

Mandating the payrolling of benefits in kind.

The government have announced additional time to prepare for the mandatory use of payroll software to report and pay:

• Income Tax
• Class 1 National Insurance
• Class 1A NICs (paid by employers)

This will now be Mandatory from April 2027.

What does this mean?

• Employers/their agents will need to report most employee benefits in kind and expenses in real time via payroll software.
• Income tax will need to be deducted from employees’ pay.
• Paid alongside Class 1A in real time – not at the end of the year.

From April 2027 in most cases – you won’t be able to use forms P11D and P11D(b). Beneficial loans and accommodation won’t be mandatory payrolled in April 2027 – Forms P11D and P11D(b) will be retained for a temporary period.