If your business provides benefits or expenses to employees, there are year-end reporting obligations to meet, and a deadline approaching. Here is a straightforward guide to what is required and what is changing.

Which benefits are affected?

Most benefits provided to employees carry both a tax charge for the employee and a Class 1A National Insurance Contributions (NIC) charge for the employer. Common examples include:

• Private medical insurance
• Gym membership
• Company cars, other vehicles and fuel
• Living accommodation and associated expenses
• Gifts to employees not covered by the trivial benefits exemption
• Use of company assets for private purposes

The tax on these benefits is payable by the employee. The Class 1A NIC charge falls on the employer only; there is no equivalent employee contribution.

Reporting via P11D

The default route for reporting taxable benefits is the P11D form, submitted to HMRC at the end of the tax year and also provided to each relevant employee.

The deadline for P11D forms for the 2025/26 tax year is 6 July 2026.

Alongside the individual P11D forms, employers must also submit a P11D(b) to report and calculate the total Class 1A NIC due. This carries the same 6 July deadline.

If you provided any benefits or paid expenses on behalf of employees during 2025/26, you are required to report these by 6 July 2026. If you need help with your reporting, please get in touch with your bk plus payroll or tax contact.

Voluntary payrolling of benefits

Rather than reporting benefits on a P11D after the year end, employers can choose to payroll benefits instead. Under this approach, the taxable value of the benefit is included in the employee’s payroll each month and tax is deducted in real time, rather than being collected via a tax code adjustment in the following year.

Most benefits can be payrolled voluntarily. The two exceptions are living accommodation and employee loans, which must still be reported on a P11D regardless.

Importantly, payrolling does not remove the Class 1A NIC obligation. Employers who have opted to payroll benefits in 2025/26 will still need to complete a P11D(b) by 6 July 2026 to calculate and declare the Class 1A NIC due.

The deadline to register for voluntary payrolling for 2026/27 has now passed. If you would like to payroll benefits from April 2027 onwards, when it becomes mandatory, please speak to your adviser about planning ahead.

Mandatory payrolling from April 2027

Payrolling of benefits will become mandatory for most employers from April 2027. Living accommodation and interest-free loans are the only exceptions and will remain on a voluntary payrolling basis.

April 2027 is not far away. We would recommend checking now whether your payroll software is able to handle payrolled benefits, and speaking to your adviser if you have any concerns about readiness.

Communicating the change to employees

One of the most important, and sometimes overlooked, aspects of introducing payrolling is keeping employees informed. When benefits move onto the payroll, employees will see a value appear on their payslips that does not represent money they will receive, but which forms part of the calculation used to deduct tax from their pay each period.

Clear communication ahead of the change helps to avoid confusion and unnecessary queries.

There is also a practical issue to be aware of: when payrolling is first introduced, employees can end up paying tax on the same benefit twice in the same tax year. This happens because benefits previously reported via a P11D are typically collected through an adjusted PAYE tax code in the following year. If payrolling begins mid-cycle, an employee may have an amended code still running for last year’s benefit at the same time as the current benefit is being payrolled.

We can provide a suitable letter template to send to employees when you introduce payrolling. Just get in touch and we will send one across.

Need help?

If you have questions about your year-end benefit reporting, want to discuss whether payrolling is right for your business, or need support ahead of the April 2027 changes, please get in touch with your local bk plus partner or tax team.