When processing payrolled benefits through the system, it is important to note that these must first be registered with HMRC through the payrolling benefits and expenses online service before the start of the tax year which is 5th April. It is also important to note that you will need to confirm your intention to payroll benefits every year with HMRC, even if the same benefits are to be processed each year.
Reporting through P11D's results in tax paid the following tax year, after HMRC has received and processed an employee's form. However, by changing to payrolled benefits this means that taxes are taken in real time. The value of the benefit is added to the employee's salary within each applicable payroll cycle, increasing their immediate taxable income but also allowing you and the employee to see exactly how much is taxed.
Once these benefits are implemented it is important to have clarity on the taxation with your employees. Employees need to be informed that their benefits will be taxed through payroll and our software can help show the breakdown of benefits and the corresponding tax deducted.
Starting to payroll benefits in the 2025/26 tax year, before it becomes mandatory in 2026/27, can simplify your processes and ensure your business is prepared for the upcoming regulatory change. By following the outlined steps you can maintain compliance and ensure a smooth transition into future tax years.
Please note that from tax year 26/27 payrolling benefits will be a mandatory process with the function to process P11Ds being removed
If you need further assistance, please feel free to contact the support team at support ukpayroll@hibob.io and for more information, see HMRC's Guidance on Payrolling