The Payrolling of Benefits is the process that allows employees to pay tax due on any benefits in kind through the payroll as opposed to filing a P11D at the end of the tax year.
Employers need to add the total cash equivalent of the benefit in kind in question to the employees taxable pay each month through the payroll.
Once you have chosen to payroll a benefit in kind, the employer must continue to submit the benefit in this way for the duration of the tax year.
Any benefits that an employer chooses not to payroll must be submitted to HMRC in the usual way through the production of a P11D.
Currently, all benefits in kind can be processed through the payroll apart from any employee beneficial loans or accommodation benefits.
The tax due on the benefit’s notional cash equivalent is paid in real-time through RTI instead of adjusting the employee’s tax code once a P11D is filled.
If you choose to payroll benefits in kind employers, you need to register with HMRC for the service through the online gateway before the 5th April for the start of the tax year in question.
If you, as the employer, choose to process employee benefits through the payroll, there is no need to file an additional P11D at the end of the tax year.
However, as the employer, you are still required to submit a P11D(b) in the normal way to pay the total Class 1A Employer national insurance due on the total cash equivalent of all benefits.
What should I do next?
For more information on processing benefits in kind, please visit HMRC’s below website:
Click here to read more about the registering for The Payrolling of Benefits.
Click here to read the Employer Guidance For The Payrolling of Benefits.
Alternatively, If you are interested in payrolling your benefits in kind and want more information, contact the Payroll Services Team directly for assistance.
First Published 2 August 2021
Last Updated 2 August 2021
2 August 2021
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