Changes to P11D Filing

2 months, 1 week ago by Oliver Atkinson

HM Revenue and Customs (HMRC) issued an update on tax simplification on the 16th of January 2024, confirming the mandatory payrolling of benefits which will take effect from April 2026. Currently, employers have the option to either submit P11D forms to declare employee benefits for tax purposes or opt for payrolling, enabling real-time taxation through PAYE. So, the primary objective of this change is to streamline and digitise the reporting and taxation process of all employment benefits, eliminating the necessity for approximately four million P11D returns and forms P11D(b) and thereby reducing administrative burdens.

While employers can presently include most benefits in their payrolling system, certain exceptions exist, such as employer-provided living accommodation and interest-free or low-interest (beneficial) loans. The upcoming changes will necessitate further clarification on the tax treatment of these excluded benefits. Also currently, the submission of P11D(b) remains obligatory for reporting the liability of Class 1A National Insurance contributions (NICs), even if benefits are being taxed through payroll. The HMRC update outlines a shift, indicating that reporting and payment of Class 1A NICs will also transition to being processed through payroll software.

HMRC have not given further details at present, anticipated draft legislation is expected to be released later this year.

This shift in benefit processing signifies a substantial change, and the expertise of payroll professionals will be crucial for the smooth implementation of these upcoming alterations.

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