Employer Bulletin – August

The latest edition of the employer bulletin (August)has been published. Included in the bulletin are reminders for employers to get ready for payrolling benefits.

A reminder that the phased introduction will be brought in under two phases.

Phase 1

Company cars and fuel, Vans and van fuel benefit and private medical and the introduction of Class 1A in real time for specific benefits under phase 1.

HMRC has published interim guidance to support employers in preparing for the changes, the bulletin advises employers to take the following action:

 Your preparations for mandatory payrolling BiKs for phase 1

It is now time for you to take steps getting ready for mandatory payrolling in phase 1, you should:

• make a list of all the BiKs you offer and would ordinarily report to HMRC on a P11D form
• make sure your payroll software can handle real time reporting of BiKs for phase 1 and complies with HMRC’s requirements — this may not be ready now, but will need to be in place by April 2027
• plan out how you will manage employees who leave or join during the tax year, or benefits that change in value
• read more information on mandatory payrolling of benefits in kind and expenses — interim guidance and legislation, including sections on communicating to employees and preparing for the transition to real time reporting of BiKs 
• understand the process for dealing with any underpayment or overpayment so you can support employees.

Remember the registration portal will open from November 2026, for those choosing to register any benefits that fall under phase 2, whilst payrolling of other benefits will be voluntary at this stage, it will allow some businesses to get ahead of the mandatory deadline for payrolling under the second phase.

Do not forget that payrolling of living accommodation and loans will remain voluntary for the next 2 years.

Directors

Guidance will also clarify the position for reporting payrolled benefits for directors with zero pay:

From April 2027, the employer will need to send details of the BiKs and expenses provided using an FPS. The FPS would usually report no payments of earnings other than BiKs, expenses and tax. Any uncollected amounts will be collected by HMRC following the end of the tax year using the current end-of-year reconciliation (P800) process or simple assessment. Where Self Assessment applies, the uncollected tax amounts will be collected by that process. More guidance will be provided in due course closer to the mandatory deadline.

Now is the time to review your payroll records and data flow, review your expenses payments to ensure that only business expenses are repaid, educate the wider organisation on what is required to meet the requirements of mandatory payrolling.

The earlier you start the process the easier the transition will be, reassuring employees of the long-term benefits of payrolling is important to make them aware that tax on any benefits in kind will be paid immediately through the payroll and not after the end of the tax year.

Businesses will need to budget for the introduction of Class 1A reporting in real time, this will be in addition to Class 1A NICs due on termination payments  therefore the additional costs will need to be factored in.