As of April 2026, significant changes are coming to the way employers report benefits in kind, as HMRC has announced the mandatory payrolling of these benefits. This major shift means that employers will need to report and pay Income Tax and Class 1A National Insurance contributions in real-time through payroll software, marking the end of annual P11D submissions.
HMRC’s journey towards making payrolling mandatory began when the option was first introduced, and now, after years of preparation, the mandatory switch is set. The move to only accepting P11D forms online in recent years appears to have been part of the strategy to ease employers into digital submission, serving as a stepping stone towards full real-time payroll reporting.
Why the Transition Matters
The shift to mandatory payrolling of benefits will streamline the process for both employers and employees. By voluntarily transitioning to payrolling benefits now, you can ensure your business is fully prepared for the 2026 deadline. This early adoption will help your employees get accustomed to the new real-time tax reporting process, as opposed to the current system of annual reporting.
What You Can Do Now
To stay ahead of the curve, consider switching to payrolling benefits on a voluntary basis. This will allow you to integrate real-time reporting into your payroll processes smoothly, ensuring you’re fully compliant when the changes become mandatory. Early adoption will also minimise disruptions and help your workforce adjust to the new system, avoiding any confusion or hiccoughs when the deadline arrives.
HMRC has been actively engaging with industry stakeholders and software developers to gather feedback that will inform the upcoming guidelines. This collaborative effort aims to ensure that the required tools and resources are available well ahead of the April 2026 deadline.
June 2024 Update: The Future of P11D Forms
A recent update from HMRC has made it clear that the transition to mandatory payrolling of benefits will come into effect from April 2026. At present, employers have the option to submit P11D forms for employee benefits taxation or use the streamlined payrolling benefits system for real-time tax calculations through PAYE.
Currently, all benefits except for employer-provided living accommodation and beneficial loans (interest-free or low-interest loans) can be included in the payrolling process. However, HMRC has yet to clarify how these exceptions will be handled under the new rules.
Even after the adoption of payrolling benefits, the P11D(b) form submission will still be necessary for reporting Class 1A National Insurance contributions. Under the upcoming changes, the reporting and remittance of Class 1A NICs will likely also be processed through payroll software.
Prepare Now for a Smooth Transition
While 2026 may seem distant, it’s essential to start preparing now to ensure that your business is fully compliant when the time comes. The Infinity Group is here to help you navigate these changes seamlessly. We offer comprehensive payroll services designed to manage the complexities of payrolling benefits, ensuring that your business stays compliant while also streamlining your payroll processes.
Reach out to The Infinity Group today to learn how our payroll solutions can prepare you for the future of employee benefits reporting. Let us help you make the transition to real-time tax reporting easy and hassle-free.