Payrolling benefits allows employers to calculate tax due on company-provided benefits in real-time. This removes the need to report these benefits on a P11D at the end of the tax year. Instead, the value of your employees' benefits is added to their taxable pay each month, so they pay the tax immediately, rather than through an adjusted tax code in the following tax year.
Payrolling benefits vs. submitting P11Ds
If you usually submit P11Ds, switching to payrolling benefits could save you time and reduce administrative costs.
Advantages of payrolling benefits:
Employees pay tax on their benefits as they receive them, in equal monthly instalments, reducing the risk of late or incorrect submissions to HMRC.
Your administrative workload decreases - once payrolled benefits are set up in PayFit, the benefit-in-kind is included in the employee’s tax calculation each month.
If you switch to payrolling benefits, you still need to:
Submit a P11D for the relevant employees if you provide living accommodation or beneficial and interest-free loans.
Submit a P11D(b) at the end of the tax year.
Pay your Class 1A NICs annually to HMRC by 22nd July.
How to register for payrolling benefits
To payroll benefits, register through HMRC’s online service before 5th April, before the start of the next tax year. After registering, you won’t need to submit P11Ds for the payrolled benefits (excluding those that can't be payrolled).
Steps:
Register via HMRC's online service, confirming which benefits you’ll payroll.
Optionally, indicate if any employees are excluded from payrolling benefits.
You only need to register once - your scheme will continue automatically each year.
Informing employees about payrolled benefits
As employees won’t receive a P11D for payrolled benefits, you must provide a statement by 1st June, after the tax year ends. This should include:
Details of the payrolled benefits (e.g., private medical insurance)
The cash value of each benefit
The relevant amount you've payrolled under Optional Remuneration Arrangements (OpRA)
Any benefits that weren’t payrolled
This can be a separate statement but make sure it’s clear which benefits were taxed and how much has been reported to HMRC.
Paying your Class 1A NIC bill
Even with payrolled benefits, your Class 1A NIC bill needs to be paid by 22nd July following the end of the tax year. Note that PayFit doesn’t include Class 1A NIC payments in any payment files it produces, so you’ll need to process this manually.
In PayFit, you can view:
Your total Class 1A NIC for the year, reported on your P11D(b)
A breakdown of payrolled and non-payrolled benefits.
For further details on how to make this payment, please refer to our Help Centre article.
Setting up payrolled benefits in PayFit
Once you’ve registered with HMRC, you can quickly set up payrolled benefits in PayFit by following these steps:
Step one: Set your benefit preferences
From the left, choose Company settings, then Benefit settings.
Under the General settings section, click Set benefits preferences.
Answer each of the questions, then click Save.
Step two: Enable benefits
From the left, choose Company settings, then Benefit settings.
Under the General settings section, click Activate benefits schemes.
Toggle on the relevant benefit, then click Save.
For more guidance on enabling your benefits, please refer to our Help Centre Article.