The reporting and payment of income tax and Class 1A NICs on benefits in kind (BIK) will have to be made through payroll software from April 2026
The reporting change to employment benefits will be mandatory and is part of HMRC’s plans for a move to a digital first tax authority but the timetable for the rollout is tight with just over two years to develop the software and conduct testing.
Announcing the launch date of April 2026, HMRC said the move was ‘building on the progress already made on the government’s ambition to fully digitalise the reporting of benefits in kind.
‘Mandation will simplify the tax affairs of three million people and reduce the need for them to contact HMRC.’
This measure will reduce administrative burdens for HMRC and thousands of employers by simplifying and digitising the process of reporting and paying tax on all employment benefits as they will no longer have to submit end of year returns.
However, there is only two years to ensure that software is developed and tested before the reporting rules come into force.
ICAEW tax faculty warned: ‘A start date of April 2026 does not leave much time for HMRC to draft a full specification for software development and testing before implementation.’
The decision was confirmed in a policy paper on tax simplification measures released by HMRC on 16 January.
HMRC said it would engage with stakeholders to discuss the proposals to ‘inform design and delivery decisions, and draft legislation will be published later in the year as part of the usual tax legislation process’.
HMRC will also work with industry experts to produce guidance, which will be made available in advance of 2026.
‘Although payrolling BIK removes the need for employers to submit forms P11D for these BIK, class 1A NIC currently still needs to be reported and paid separately to HMRC using form P11D(b),’ stressed the ICAEW tax faculty.
‘The news that class 1A NIC will be payable via payroll software is potentially welcome from an administrative viewpoint, but it is currently unknown whether the due date for paying class 1A NIC will change.’
HMRC said further information will be published via its usual communication routes, such as employer bulletins.