If you’re planning to payroll benefits in kind (PBIK) for the first time, here’s what you need to know about registration, deadlines, and how to set this up in UK Payroll in Bob.
Register with HMRC
- Before you can payroll benefits, you need to register with HMRC as an employer who wants to payroll benefits in kind.
- You must register before the start of the tax year (before 6 April) in which you want to start payrolling benefits.
- You need to register for each benefit type you plan to payroll.
- Registration is done directly with HMRC via your Government Gateway account.
- If you miss the deadline, you’ll need to wait until the next tax year to start payrolling those benefits.
- It’s also important to let your employees know that their benefits will be taxed through payroll instead of via a P11D.
How Payrolled Benefits Work in UK Payroll
When you payroll a benefit:
- The taxable value of the benefit is added to the employee’s gross pay each pay period.
- Employees pay tax on the benefit in real time.
- You still need to submit a P11D(b) at year-end to report and pay Class 1A National Insurance contributions.
- Make sure you’ve confirmed which benefits are eligible for payrolling and how you want to calculate their taxable value before setting them up in UK Payroll.
Set Up Payrolled Benefits in UK Payroll
- Once you’re registered with HMRC, you need to configure this in UK Payroll directly, not in Bob.
- Go to the employee’s profile and navigate to their pay items tab.
- Common benefit types can be selected from the 'schemes' section.
- Ensure the benefit is set to be taxed through payroll (payrolled benefit in kind).
You’ll need to enter:
- The taxable value.
- The correct effective date (usually aligned with the start of the tax year or when the benefit begins).
- The system will include the value in the employee’s taxable pay during each payroll run.
Things to Keep in Mind
- You cannot payroll some benefits (for example, certain types of living accommodation and beneficial loans).
- Employees may see a temporary 'double taxation' in the first year of payrolling BIKs. This can be caused by paying tax on the current year benefit, alongside their tax code being adjusted based on the benefit(s) recorded in the previous year.
- If an employee leaves mid-year, make sure the correct taxable value has been processed through payroll.
- If you stop payrolling a benefit, you must inform HMRC and revert to P11D reporting for the following tax year.
If you’re unsure how a specific benefit should be treated, check HMRC guidance before processing.