By Louise McGuire, head of payroll services at RMT Accountants & Business Advisors
With changes to employee benefits reporting just a year away, now is the perfect time for you to be taking proactive steps to future-proof your business’s payroll processes.
HMRC has announced that, from April 2026, reporting and paying income tax and Class 1A National Insurance Contributions (NIC) on benefits in kind through payroll will become mandatory as part of the government’s efforts to streamline reporting and improve tax transparency.
Payrolling benefits is a method of reporting the taxable value of employee benefits such as company cars, private medical insurance and gym memberships through your monthly payroll system, instead of annually via a P11D form.
This will allow employees to pay the tax in real-time, rather than through a tax code adjustment in the following year.
These changes will require businesses to adapt their payroll systems to ensure compliance – and while this may seem like a major task, acting early on the new approach provides real opportunities for business owners.
Advantages of payrolling employee benefits
1. Simplified administration
Payrolling benefits removes the need to file P11D forms at the end of the tax year, significantly reducing the administrative burden on businesses. All benefit tax is calculated and collected monthly, ensuring a smoother, more predictable process.
2. Improved employee experience
Employees can see the tax impact of their benefits in real-time on their payslips, avoiding surprises or confusion from underpaid taxes later. This transparency fosters trust and makes it easier for employees to manage their finances.
3. Efficient tax handling
By payrolling benefits, businesses ensure that taxes are calculated accurately throughout the year, reducing the risk of errors or delays that can occur with annual reporting.
4. Enhanced cash flow management
For both employers and employees, spreading the cost of benefit-related taxes over the year can ease cash flow pressures.
How easy is it to make the switch?
Switching to payrolling benefits is straightforward, especially if you work with an experienced payroll team. RMT Accountants’ specialist payroll team can handle the transition for you, ensuring your payroll system is updated and compliant with HMRC guidelines.
Our outsourced payroll services take the stress out of managing employee benefits, allowing you to focus on running your business.
Key steps include:
Registering with HMRC to payroll benefits.
Updating payroll software to include taxable benefits.
Communicating changes to employees to ensure they understand the new process.
Why you should act now
Although the mandatory deadline is April 2026, waiting until the last minute could create unnecessary challenges.
By implementing payrolling now, you’ll avoid the inevitable rush closer to the deadline, giving your business time to adapt smoothly.
Making the switch before the April 2026 deadline also means you’ll start enjoying the administrative and financial benefits immediately, and ensures your employees are comfortable with the changes well ahead of time.
Our expert payroll team is here to guide you every step of the way. With years of experience helping businesses across the North East, we can manage the entire process for youfrom registration with HMRC to employee communication.
For further information and advice on how payrolling benefits can work for your business and to get started as soon as possible, please contact Louise McGuire at RMT Accountants & Business Advisors on 0191 256 9500 or via advice@r-m-t.co.uk