Voluntary payrolling of benefits in kind

Produced by a Tolley Employment Tax expert

Employment Tax

Guidance

Payrolling of benefits is the collection of tax due on the benefit by the employee through payroll in real time. The legislative framework for voluntary payrolling of benefits in kind can be found in ITEPA 2003 and the PAYE Regulations.

Payrolling benefits ― pros and cons

Payrolling of benefits is currently voluntary, so employers can choose whether they wish to payroll a benefit and which benefits to payroll with the exception of two particular benefits which are specifically excluded from the legislation (see below). The difference between payrolling a benefit and reporting it the standard way via a P11D is as follows (this assumes it is a benefit to which both tax and Class 1A NIC applies; treatment of the benefit will vary.

In what is expected to be a significant development, in January 2024 the Government confirmed it was intending to make the payrolling of benefits mandatory from April 2026. The positioning of this new potential employer obligation as a Simplification update would seem to be ‘optimistic’; especially if the new measure were implemented

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