P11D Forms - Benefit in Kind

5 days ago5 min read

P11D Forms Changes - Benefit in Kind by Rachael Ball

From 6 April 2026, HM Revenue and Customs is changing the reporting requirements for employers reporting their employees’ Benefits in Kind.

I have summarised below the current reporting position and how this is set to change, and then provided an example to demonstrate what this may mean for you and your business.

Up until 5 April 2026, employers providing Benefits in Kind (BIKs) can either report these annually on a form P11D or monthly via their digital payroll system. If a P11D form is used, this is required to be submitted online prior to the 6 July after the end of the tax year the BIK is received. Once processed by HMRC, the employee’s tax code for the next tax year is usually adjusted to collect the additional Income Tax due on the BIK in arrears. Although in some cases, HMRC may request the outstanding amount be paid by the employee under a Simple Assessment at the end of the tax year.

Alternatively, employers have the option to payroll BIKs, whereby the value of the BIK is calculated at the beginning of each tax year, and that value is included in the employee’s gross taxable income which is spread over the months in the tax year and taxed through PAYE, the same as their salary. This method collects the Income Tax due from employees monthly and in real time, when the benefit is being received, and in effect should result in no balance due for payment at the end of each tax year and therefore no adjustment to next year’s tax code.

In both cases, employers report their employers National Insurance due on the BIK on a form P11D(b) by 6 July at the end of each year.

From 6 April 2026, employers will no longer have the option to submit P11Ds, and most BIKs that can be pay rolled, must be pay rolled (except for living accommodation and interest free loans, which will be mandated into the payroll system later).

This change is meant to streamline the BIK reporting process with the payroll system, hopefully simplifying the reporting of BIKs to HMRC and reducing administration time and cost for businesses. It is also hoped that the real-time payment of the tax due on the BIKs will be beneficial for both HMRC and employees, as there should be no balance due at the end of each year.

However, the first year a benefit switches from P11D to payroll, an employee may see some higher tax payments and therefore less net monthly pay, this is due to both the previous year’s BIK being adjusted for in the employee’s tax code and the current tax years BIK being included in the gross taxable amount in the payroll. It would be advisable therefore to discuss the upcoming changes with the employees prior to making the change.

It should also be noted that employers are still required to submit P11D(b) forms annually at the end of the tax year.

Ahead of the mandatory changes, employers may wish to take action now and start to incorporate into the payroll the BIKs received by employees/directors in the 2025/26 tax year. This may give you the chance to get used to payrolling benefits, before this process becomes compulsory next year.

If your business wishes to payroll benefits, you must register online to do so before the start of the tax year, so for 2025/26, by 5 April 2025.

I have set out in an example below what this transition may look like in practice.

For a company with 3 directors who each had a company car for 2024/25, the process (as the BIKs were not pay rolled) is as follows:

3 x form P11D required to be prepared and submitted online to HMRC by 6 July 2025
These will be processed by HRMC and the tax due collected through the employees 2025/26 tax codes
Form P11D(b) required to be prepared and submitted to HMRC by 6 July 2025
Class1A National Insurance due on the BIKs payable by the company to HMRC by 22 July 2025

If then for the next tax year 2025/26, the company wishes to payroll the company car BIKs, the process would be as follows:

Company must register for payrolling benefits prior to 5 April 2025 (through HMRC Online Services)
Company calculates the taxable value of the BIK at the start of the tax year, adds this to the annual salary which is split across the months in the tax year and taxed through PAYE in the payroll system. This information is submitted to HMRC through the Full Payment Submission (FPS).

i.e. if the director’s annual salary is £24,000 and the car BIK is £1,200, then the gross annual income would be £25,200 split equally over 12 months this would be a monthly gross figure of £2,100, taxing both salary and BIK through PAYE.

If the value of the BIK changes throughout the year, say the employee leaves, this can be updated through your digital payroll system
Calculate the new annual amount, deduct what has already been taxed and then split the remainder across the remaining months
Form P11D(b) required to be prepared and submitted to HMRC by 6 July 2025
Class1A National Insurance due on the BIKs payable by the company to HMRC by 22 July 2025

As above, in this example during the first year 2025/26 the directors will have an adjusted tax code to collect tax due on their 2024/25 BIK and then real-time value of their 2025/26 taxed monthly, so their 2025/26 net pay may be lower.

By pay rolling benefits, companies should be able to benefit from the reduced administration of preparing and submitting annual P11Ds for each employee, reducing any professional fees associated with these also. Doing so prior to the process being mandatory next year could also give you an opportunity to identify any issues with this kind of reporting and gives you enough time to rectify any issues before not doing so could be penalised by HMRC.