In January, we held a joint payroll webinar featuring experts Steph Butcher of EBCam and Susan Eldon of Affinia in which they provided essential insights on employee benefits and crucial changes to P11D reporting. During the session, guests were able to enhance their understanding of employee benefits, ensure compliance with the upcoming changes to how taxable benefits are reported, and access valuable insights. Key points from the session included:-
- Highlights from EBCam’s benefits and rewards survey
- 2024 Autumn Budget – headline for employers
- Understanding employee benefit options and tailoring benefits to your workforce
- Getting your data ready
- The P11D process and benefits in kind
- Changes to payrolling of benefits from April 2026
The session was rounded off with an interactive Q&A.
Top 5 Questions – Benefits in Kind.
- Q1. Our company offer simple Benefits in Kind (BIK) such as company cars and healthcare. Will this continue to be straightforward reporting?
We agree that payrolling the benefits of Health and Dental is relatively straightforward; however, you need to consider available data from your healthcare provider and your policy renewal dates to ensure accurate real-time reporting.
On the face of it, company cars can be straightforward, although if there are in tax year changes to vehicles provided, payroll need to be informed as and when these happen to ensure the employee record is updated accordingly. It adds additional layers of complexities and adjustments if payroll are advised after the payroll cut off date or submission to HMRC.
- Q2. If I have an employee who pays tax on BIK for 2025, will there be any change to their tax code?
If an employee has been in receipt of a benefit historically and a prior P11D has been filed with HMRC – the employees tax code for the next tax year is assumed or predicted that the employee is still in receipt of the benefit for the following tax year.
The pre-registration with HMRC notifies them that the tax will now be collected through payroll; therefore, any previously coded-out forecast of benefits will be removed.
For example, suppose you have an employee currently on a 500L tax code due to their benefits in prior years. In that case, HMRC will remove the adjustment within the tax code and re-issue more to the alignment of the standard 1257L of personal allowances.
- Q3. If I have completed the P11d process for year 24/25, will there be a change tax code after July 2025?
Once the 24/25 P11D is filed with HMRC, they will take account of the tax that should have been paid on that benefit. However, if the benefit is historic, there would have been an element of predicted/estimated amount of tax due accounted for on the employee’s 24/25 tax code in operation. Therefore, HMRC needs to reconcile and adjust any future tax codes that may be issued.
Unfortunately, this is a difficult one to assess and advise on, as it is not a ‘one size fits all’ scenario – it depends on individual employee circumstances regarding the time they have been receiving benefits and potentially other factors included in their PAYE coding notice.
- Q4. Do the changes mean my employees could be paying a double tax for 2024/25 and from July 2025?
Potentially. Any new joiners to the business or employees newly in receipt of benefits within the 24/25 tax year will pay tax on benefits from the P11D and through payroll – effectively the ‘double taxation’.
- Q5. Will the P11d and P11dB forms no longer need to be supplied after July 2025 if all payments will be deducted through payroll?
There will still need to be a P11D(b) form for the 25/26 tax year even though the benefits are payrolled. Currently HMRC have not issued parameters for Class 1A NIC to be accounted for through payroll.
However, when they become mandatory from April 26, there should no longer be a requirement for a P11D(b) as HMRC has stated they are consulting with Payroll software providers on the RTI fields to account for the Class 1A NIC.