The removal of P11D forms, replaced by mandatory payrolling of benefits in kind (BIK) by April 2026, is deferred for 12 months. This was first introduced in January 2024, but with several appeals, HMRC announced on 28 April 2025 that it will delay the implementation in April 2027.
P11Ds were used for reporting taxable benefits from the early 1960s until voluntary payrolling of BIKs was introduced. This deferral greatly helps employers as the transition is not that simple.
Currently, voluntary payrolling only covers income tax via PAYE, whilst Class 1A NIC is still paid annually. From April 2027, Class 1A NIC for voluntarily payrolled benefits will also be paid via payroll.
With the new payrolling system, the benefits will be paid tax each pay period, as their annual value will be calculated and divided across pay periods. Reporting is done via the Full Payment Submission (FPS) each pay period (like salary and standard NIC).
These changes will not affect the reporting of benefits under a PAYE Settlement Agreement (PSA).
What Employers Need to Do Now
Before the official rollout of mandatory BIK payrolling, here’s what you can do as an employer:
- Ensure your payroll software can handle payrolling benefits.
- Explain to employees how the changes will impact their net pay and PAYE codes.
- Ensure that benefit data is accurate and available for timely payroll processing.
- Review if your current benefits are still relevant before the changes.
You can start voluntarily payrolling your employees’ benefits now to make the full transition easier. Need help with streamlining your payroll systems? Legend Financial is here to help – contact us today!
