NL 210926: Changes to the treatment of Class 1A on Payrolled Benefits

And here we go again!

HMRC has updated its guidance on the payment of Class 1A in real time for the mandatory payrolling of benefits in kind set to be introduced under phase 1 in April 2027.

This means that from 6 April 2027, Class 1A payment in real time will not only apply to Phase 1 benefits which include company cars and fuel, company vans and fuel and employer private medical, it will now encompass Class 1A on all payrolled benefits so if you are currently registered to payroll other benefits outside of those required under Phase 1, you will have to pay Class 1A in real time for ALL benefits, not just the mandatory ones.

There will be no change to the existing exclusions of mandatory reporting for living accommodation and loans, but if you choose to voluntarily payroll these, Class 1A in real time will apply also.

Further exceptions to mandatory payrolling have been clarified for Globally Mobile Employees (GMEs) typically those that fall under s690, meaning the employees are international workers that perform duties in more than one country, tax is assessed on residency, earnings and duration of duties performed in any one country which can in some cases lead to double taxation liabilities.  For these groups you can continue to report benefits in kind annually on the P11D and P11D(b) submissions. Given the complexities of these arrangements, it is advisable to seek professional advice from your tax advisers on whether the rules apply.

The updated guidance on GMEs states:

Employers will have the option to voluntarily exclude globally mobile employees from mandatory payrolling from 6 April 2027 through a new service that will be available from November 2026. Employers should continue to use existing year-end reporting arrangements for these employees through forms P11D and P11D(b).

Class 1A reporting and the FPS

New Class 1A data fields will be added to the FPS to report the amount of Class 1A due on the payrolled benefits as follows:

• Total real time Class 1A National Insurance contributions due in Pay Period payrolled benefits in kind.
• Total real time Class 1A National Insurance contributions amount Year to Date payrolled benefits in kind.
• Class 1A Adjustment Box payrolled benefits in kind.

From April 2027, Class 1A on all payrolled benefits barring those that are exempted will be due each month and payable as part of your in-year liabilities, this is not to be confused with the Class 1A NICs due on Termination payments that exceed £30,000, the two are, and will remain, separate entities, so be mindful when reporting the details on the FPS.

We advised last week that the first transitional year will require extra focus on your reporting and declarations at tax year end, benefits in kind that have not been payrolled during the 2026/27 tax year will still require reporting on the annual P11D and P11D(b), which is due on 6 July 2027 with payment for Class 1A on the benefits in kind due 22 July following the end of the previous tax year, for electronic payments. At the same time, you may also need to pay Class 1A in real time for the payrolled benefits regardless of whether they fall under Phase 1 or Phase 2 mandatory deadlines.

Registrations can commence from November 2026 if you decide to sign up to payroll benefits ahead of the mandatory deadline for phase 2 which will come into force on 6 April 2028.

HMRC is expected to publish further guidance in due course, speak to your software providers about any updates as they will be the first to receive instructions for implementation of further changes.