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Payrolling Benefits or P11D’s?

21st Mar 2022

Employers can choose to payroll their employees’ benefits via HMRC Payrolling Benefits In Kind (PBIK) service which aims to streamline the taxing of benefits in kind via the payroll function in real-time and eliminates the need to complete a P11Ds for the employees.

Register for payrolling benefits and expenses

To get started, you will need to register with HMRC before 5th April via their online service before the new tax year commences that you wish to start payrolling benefits. Unfortunately, HMRC has not granted permission for Agents to do this on your behalf, so you will need to do this yourself. If you miss the registration deadline, you cannot payroll benefits until the next tax year.

Once you’ve successfully registered, the next step is to let your employees know that, as a business, you’re going to start payrolling benefits from the start of the new tax year and what it means for them. You will also need to let us know if we are managing your payroll!

What are the advantages of payrolling benefits?

The main benefit for employees is that their tax will be collected in real-time, rather than being collected through an adjusted tax code.

  • Employers no longer need to submit P11D and P46(Car) forms to HMRC
  • Simpler PAYE codes mean we receive fewer queries from employees regarding tax
  • Tax deductions in monthly payroll will be more accurate
  • Tax codes for individuals should change less frequently
  • Fewer forms for employers to complete at year-end

Which benefits can you payroll?

During registration, you must tell HMRC which benefits you want to payroll. You can payroll all benefits, except employer-provided living accommodation and interest-free and low-interest (beneficial) loans, which need to be reported on a P11D form.

Employers using PBIK must note that, while you’ll no longer submit P11D statements for the employees in July, you will still have to file a P11D(b) declaration by the 6th July and pay any employers Class 1a NI contributions by the 22nd July.