Payrolling benefits-in-kind: How employers can prepare now

As part of the recent Autumn Budget, the government confirmed that the changes to the payrolling benefits-in-kind reporting will go ahead as planned from April 2026.

From the 2026/27 tax year, it will be mandatory for employers to tax all benefits-in-kind through payroll. Loan and living accommodation benefits will initially remain eligible for voluntary payrolling. This change will eliminate the need for Forms P11D for payrolled benefits.

For employees, this change means their tax codes will no longer include benefits that are payrolled from April 2026, with tax collected in real-time each pay period through the payroll.

We are expecting further guidance from HMRC with respect to the mandatory rules, payroll technicalities.

How can employers prepare now?

Employers currently have the option to payroll some or all of their employee benefits on a voluntary basis from 6 April 2025, ahead of the mandatory rules.

Early adoption can help:

• Ensure compliance – test and refine your payroll systems, data flow, and reporting to meet the new requirements without stress.
• Minimise disruption – ensure a seamless transition when the rules become mandatory.

When should an employer register to voluntary payroll benefits?

Registration must take place before 6 April 2025 to voluntary payroll benefits for 2025/26. Employers should ideally start planning their implementation as soon as possible.

How Moore Kingston Smith can help with voluntary payrolling of benefits

We have extensive experience assisting clients with the implementation of payrolling their benefits-in-kind. Our employment tax team, working alongside our specialist payroll colleagues can provide a variety of services to help, including:

Implementation

• Client registration for payrolling benefits with HMRC
  We can handle the registration process to get your business set up for voluntary payrolling benefits.
• Employer guide
  Our comprehensive guide includes everything you need to know about payrolling benefits-in-kind, from process details to key compliance requirements.
• Employee communication toolkit
  Clear communication is key to a smooth transition. We provide templates communications, FAQs, and even employee workshops to keep your team informed and engaged.
• Data flow review
  We can analyse your benefits and expenses data to ensure real-time, accurate payroll reporting, especially if data is spread across multiple systems.
• Benefit calculation services
  Precise calculation of benefits-in-kind amounts to ensure employees’ payroll deductions are correct and aligned with HMRC requirements.
• Payslip and system testing
  We can test payslips and check that your payroll systems can handle real-time reporting. If needed, we offer payroll services with software specifically designed for payrolling benefits..

Mid-year and end of year

• Perform in-year adjustments
  Benefit calculations may require updating due to data changes.
• End of year review and reporting
  We provide end-of-year reconciliations, P11D reporting for any non-payrolled benefits and prepare and submit employer P11D(b) to HMRC (still required under the voluntary rules).

Expense and benefit reviews

• Expense and benefit tax compliance health check
  Review your wider expenses and benefits to ensure accurate capture and reporting to HMRC. Compliance activity is increasing, and expenses and benefits processes often form part of employer compliance checks.
• Optimise benefits package
  Use our employee benefits benchmarking services to ensure you are getting value for money, e.g. not overpaying for your private medical policy.

Next steps

Taking proactive steps now ensures your organisation is well-prepared for the upcoming changes to payrolling benefits-in-kind.

Contact Moore Kingston Smith’s employment tax specialists to learn more or to get started with voluntary payrolling.