Goodbye P11ds!

March 13, 2025 Posted by Helen Delbridge

The transition from P11D reporting to Payrolled Benefits in Kind

The landscape of tax reporting has seen significant changes since the introduction of the P11D form in the 1960s. To modernise the reporting and payment of taxes on employment benefits such as private healthcare, HMRC introduced the voluntary payrolling of Benefits in Kind (BIKs) in April 2016. This system allows employers to process BIKs through the payroll, eliminating the need for employees to pay taxes on these benefits in arrears.

As confirmed in the 2024 Autumn Budget, HMRC will be mandating the payrolling of all BIKs, effectively removing the need for P11D forms entirely from April 2026. This significant shift is set to impact approximately four million employees, streamlining the collection of income tax and eliminating the delays caused by the current system.

Under the new approach, taxes on BIKs will be collected in real time, alongside regular pay.

How Payrolling BIKs works

Under the new framework, BIKs will be reported through the Full Payment Submission (FPS), which is submitted to HMRC on or before each pay date. Currently, the FPS includes two fields related to BIKs:

Value of benefits taxed via payroll in the pay period
Value of benefits taxed via payroll year-to-date

However, with the full transition to mandatory payrolling in 2026, it is expected that additional fields will be introduced to the FPS to capture a more detailed breakdown of BIKs. This change will require employers to maintain detailed and separate records of each benefit to ensure an accurate audit trail.

How we can help

This transition may pose challenges for many businesses, particularly those without a dedicated payroll department. Graeme Witt MCIPP dip, manager of our payroll department, is available to help businesses navigate these changes. With over 20 years of experience in payroll services, Graeme and his team are well-equipped to guide your business through the complexities of payrolling BIKs and ensure compliance with all new regulations. If you would like to learn more or need assistance with the upcoming changes, feel free to reach out to Graeme for expert advice and support.