HMRC announces mandatory payrolling for benefits-in-kind

The Government has announced that from April 2026, employers will have to report and pay income tax and Class 1A National Insurance contributions (NICs) on benefits-in-kind using payroll software.

The government aims to simplify the tax process for millions by digitizing the reporting of benefits-in-kind.

About three million people will benefit from the new mandate as it will streamline their tax affairs, reducing their need to contact HMRC directly.

There will be a substantial reduction in administrative burden for employers as a result of the change. HMRC's end-of-year returns will be digitised and simplified, which will eliminate the need to submit four million of them currently.

According to HMRC's latest simplification update, the tax authority is committed to engaging with stakeholders so that the design and implementation of the new system are well-informed and practical. This mandate will be detailed in draft legislation later in the year as part of the standard tax legislation process.

Standard communication channels, such as employer bulletins, will inform employers and taxpayers of this development.

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