HMRC reopens voluntary payrolling registration for benefits in kind

Employers can once again register with HM Revenue and Customs to payroll employees' benefits in kind voluntarily, after the online service reopened for registrations and cancellations on Thursday 5 November. HMRC's updated guidance says living accommodation and loans can now be payrolled through it.

Registration has to happen before the start of the tax year it applies to, so signing up now covers 2027-28 onwards. The way benefits are reported for the current tax year cannot be changed. Agents reach the service through HMRC's PAYE for agents online service.

Compulsory payrolling from 2027

From 6 April 2027, payrolling becomes compulsory for four types of benefit: medical benefit, company cars, vans, and car and van fuel. These cannot be registered through the voluntary service. Employers report them through their payroll software instead.

From April 2028 most other benefits in kind are due to become compulsory as well. Employer-provided loans and accommodation are the exceptions, along with benefits for globally mobile employees. HMRC's policy paper says feedback from employers and others indicated that loans and accommodation are particularly burdensome to payroll. They stay outside the compulsory regime while HMRC works on other approaches, so the voluntary service is the route for an employer that wants to payroll them.

The paper also says the legislation will include a power to waive penalties for non-deliberate inaccuracies in the 2027 to 2028 tax year.

Tax and National Insurance

For the rest of 2026-27, the existing rules apply. Employers add the cash equivalent of the benefit to pay and deduct Income Tax through payroll, but still work out Class 1A National Insurance and file form P11D(b).

From 6 April 2027, for benefits registered for payrolling, Income Tax and Class 1A National Insurance are both dealt with in real time through payroll software. Payrolled benefits no longer go on a P11D or P11D(b), and HMRC keeps their value out of employees' tax codes.

Any benefit that is not payrolled still needs an electronic P11D. Employers can exclude a particular employee from a payrolled benefit through the service, but once excluded that employee cannot be added back to the benefit in the same tax year.

Telling staff

Employers that payroll benefits must give employees written notice, on a payslip, by email or by letter, by 1 June after the end of each tax year. It has to explain that they will not be taxed twice and give details of the payrolled benefits and any that were not payrolled. In the first year, staff should also be told their tax code will change to remove the adjustment for those benefits.

HMRC's guidance also covers what happens if payrolling a high-value benefit would take tax above 50% of an employee's cash pay, known as the overriding limit. The employer can either remove that person from payrolling for the rest of the year or carry the uncollected tax forward to later paydays.

Voluntary payrolling of benefits has been available since April 2016, but HMRC says take-up has been limited and many employers still report after the year ends on form P11D.