Payrolling Benefits vs P11D Comparison
From April 2026, payrolling benefits in kind (BiK) becomes mandatory for most employers. Instead of reporting on P11D and collecting tax via adjusted tax codes, the tax is collected via monthly payroll deductions.
Benefit Details
Frequently Asked Questions
When does mandatory payrolling of benefits in kind start?
Mandatory payrolling of benefits in kind starts from 6 April 2026. From this date, employers must process most benefits through payroll rather than reporting them on P11D forms after the year-end.
What is payrolling benefits in kind?
Payrolling BiK means the taxable value of benefits (company car, private medical, etc.) is divided into 12 equal monthly portions and added to the employee's taxable pay each month. Tax is collected via PAYE instead of via a year-end P11D and adjusted tax code.
What benefits can still be reported on P11D from April 2026?
After mandatory payrolling, only two benefit types remain exempt from payrolling: living accommodation provided by employers, and employment-related loans below or above the beneficial loan threshold. These must still be reported on P11D.
How does payrolling affect the employee?
Employees pay tax on benefits in real-time each month rather than having their tax code adjusted the following year. This avoids large one-off tax catches and makes cash flow more predictable. It also means employees see the correct year-to-date tax on their payslip.
Does payrolling change employer Class 1A NIC?
No. Employer Class 1A NIC (13.8% of the benefit value) remains due in July following the tax year, calculated on the P11D(b) return — regardless of whether the benefit is payrolled.
What happens to tax codes when payrolling starts?
When an employer payrolls a benefit, HMRC removes the benefit-related deduction from the employee's PAYE tax code. If an employer switches to payrolling mid-year, HMRC adjusts the code automatically.
Do I need to tell employees about payrolling?
From April 2026, HMRC will notify employees about mandatory payrolling. Employers are encouraged to communicate the change to employees in advance to avoid confusion about changes to net pay.
Does payrolling eliminate the need for P11D forms entirely?
Not entirely. P11D(b) (the employer return of Class 1A NIC) is still required annually. Individual P11D forms are only eliminated for payrolled benefits — the P11D(b) filing requirement remains.
What is a benefit in kind?
A benefit in kind (BiK) is any non-cash benefit provided by an employer to an employee. Common examples include company cars, private medical insurance, gym memberships, fuel cards, and subsidised meals exceeding the £1/meal exemption.
How is the taxable value of a company car calculated?
The taxable value of a company car is the list price multiplied by the relevant CO2 emissions percentage (BiK rate). For 2025/26, zero-emission EVs have a 3% BiK rate, rising to 4% from 2026/27. Petrol cars range from 15% to 37%.
What records must employers keep for payrolling?
Employers must maintain records of the payrolled benefit value per employee per period, the monthly amounts added to payroll, and the year-to-date benefit value. These feed into the P11D(b) Class 1A NIC calculation.
Can employees opt out of payrolling?
From April 2026, payrolling is mandatory — employees cannot opt out. Previously, under voluntary payrolling, employees could request P11D reporting if they preferred their tax code to be adjusted.