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Benefits in Kind
Company Benefits: Payrolled Benefits
Company Benefits: Payrolled Benefits
Rebecca Russell avatar
Written by Rebecca Russell
Updated over a week ago

Payrolling benefits is an option the HMRC has given to employers to remove the need for a P11D at tax year-end. The basic principle is that rather than submitting a P11D each year for each employee, most of your employees' benefits can now be added to their taxable pay each month so that they pay the tax due on them in real-time rather than having their tax code reduced in the following tax year.

Payrolling benefits vs. submitting P11Ds

If your organisation submits P11Ds each year for employees, payrolling benefits may be an effective and efficient way to minimise administration time and costs.

Payrolling benefits will:

  • Allow employees to pay the tax on their benefits in real-time, in equal monthly instalments. This, in turn, minimises the risk of late and inaccurate submissions to HMRC.

  • Reduce administration time and costs.

  • Once your payrolled benefits are set up for the tax year in the app, nothing further is required from you. The benefit in kind is included in the employee's tax calculation each month.

There are still some aspects of benefits in kind that aren't completely removed by payrolling benefits. This includes:

  • Having to submit a P11D(b) at the end of the tax year as your Class 1A NICs will still be paid to the HMRC annually by 22nd July.

  • Having to submit a P11D for certain benefits that cannot yet be payrolled

Which benefits can't be payrolled?

You can payroll any benefit in kind, excluding:

  • Employer-provided living accommodation

  • Beneficial and interest-free loans

If you provide these benefits to employees, they still need a P11D.

How to register for payrolling benefits

If you want to register for payrolling benefits, you must do so no later than 5th April for the following tax year. This means you will not need to submit a P11D for your benefits (excluding anything that cannot be payrolled).

You will be required to tell the HMRC using the online service, which benefits you will be payrolling and if you are excluding any employees from the payrolling benefits scheme.

You only need to register to payroll benefits once. After this, your payrolling benefits scheme is ongoing.

You can also deregister from payrolling benefits using the online service. Again, you must do so by the start of the tax year. If you decide mid-year that you do not wish to payroll your benefits you will need to wait until the start of the next tax year to deregister.

Letting employees know about payrolled benefits

As your employees will no longer be receiving a P11D for their benefits, you will need to confirm to them no later than 1st June following the end of the tax year:

  • details of the benefits you’ve payrolled such as private medical insurance

  • the cash value equivalent of each benefit you’ve payrolled

  • the relevant amount you’ve payrolled for optional remuneration (OpRA)

  • details of benefits you have not payrolled

This can be done in a separate statement but you must be clear on which benefits have been subject to tax and how much you have reported to HMRC.

Paying your Class 1A NIC bill

Your Class 1A NIC bill accumulates over the tax year and must be paid on the 22nd of July following the end of the tax year. Do not pay any Class 1A NIC liability to the HMRC before the end of the tax year.

In PayFit, you can see:

  • Your total Class 1A NIC for the year to add to your P11D(b)

  • How much of that is attributed to payrolled and non-payrolled benefits.

Important: Class 1A NI isn't included on any payment files produced by PayFit. Therefore, you need to make the payment manually. For further information on how to make the payment, please refer to this Help Centre article.

Payrolling benefits in PayFit

The next step in payrolling your benefits after you have registered with the HMRC is to set this up in the PayFit app.

Setting benefit preferences

  1. From the left, choose Company settings, then Benefit settings.

  2. Under the General settings section, click Set benefits preferences.

  3. Answer each of the questions, then click Save.

Enabling benefits

  1. From the left, choose Company settings, then Benefit settings.

  2. Under the General settings section, click Activate benefits schemes.

  3. Toggle on the relevant benefit, then click Save.

For more guidance on enabling your benefits, please refer to our Help Centre Article.

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