HMRC has confirmed mandatory real-time reporting of income tax and Class 1A National Insurance contributions for certain benefits in kind and taxable expenses will now be phased in from 6 April 2027, rather than rolled out in a single start date.
Phase one will begin from 6 April 2027, and phase two will commence from 6 April 2028. From April next year, mandatory payrolling of BIKs will be phased in for company cars, car fuel, vans, van fuel and employer-provided medical benefits. The employer works out what the yearly value of the benefit is, divides this by the number of pay periods in the year and this amount is taxed each period. If there are any changes to the benefit amount throughout the year, the amount can be adjusted.
As part of phase two, the mandatory payrolling of most other BIKs will be introduced, excluding loans and accommodation, which will remain voluntary.
Currently, the voluntary payrolling system allows income tax on benefits in kind to be collected via PAYE. However, Class 1A NIC is still paid following the end of tax year in respect of voluntarily payrolled benefits, alongside submission of form P11D(b). Class 1A NIC will also be paid via payroll throughout the year, and no form P11D(b) will be required unless it relates to non-payrolled employee loan or accommodation benefits.
Employers are urged to prepare for these changes as soon as possible. You should ensure that your current payroll software meets the requirements to payroll benefits. Those employees receiving payrolled benefits for the first time should be advised of the changes and to check their PAYE code to make sure that tax is not collected twice on the same benefit. They should also be advised of their net income in advance.
If you have any queries please contact: Neil Armstrong, Tax Partner T: 028 9032 3466 E: neilarmstrong@bakertillymm.co.uk
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