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Do you want to payroll benefits?

Accountancy Updates
Hannah Dumenil
11/03/2022
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To payroll your employer benefits is still voluntary. You are not required to payroll benefits, but you can do so to reduce the P11D submissions at the end of the tax year.

If you would like to payroll your benefits, you need to register with HMRC before the start of the tax year of the year you want to start processing the benefits via payroll. If you wish to start this in April 2022, you are required to register before April 2022.

If you payroll the benefits you will no longer need to use form P11D, however you still have to work out the Class 1A National Insurance contributions on benefits and complete a form P11D(b). The tax codes for all employees receiving the benefits will be amended, unless you exclude any employees that you do not want to payroll benefits for in the online service.

You can payroll all benefits except:

  • employer provided living accommodation
  • interest free and low interest (beneficial) loans.

You must still report these benefits on a P11D, even if you’re payrolling other benefits for the same employees.

If you choose to payroll company car benefits, you do not need to submit a form P46(Car).

If you have a new employee with payrolled benefits, you must tell them how the benefit will be taxed.

Tell the employee that:

  • their tax code may be amended to adjust any benefits from previous employments
  • the new benefit will not be included in their tax code
  • any underpaid tax they may be paying through their existing tax code will still be collected by their tax code.

It would be beneficial to include this in the induction, or HR handbook to make them aware of the benefit.

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