Benefit now be taxed now…

With the new tax year nearly upon us, it’s worth bearing in mind some new HMRC rules that will be impacting your company’s payroll and benefits, specifically staff perks that are classed as a ‘benefit in kind’.

The new rules will be made mandatory from April 2026, but companies can choose to opt into this voluntarily from next month.

The current process: P11D reporting

At present, companies submit their employees’ P11D forms to HMRC in July, following the end of a tax year. These forms report any taxable benefits received by employees within the previous year outside of normal salary, including plans such as PMI and dental. In short this means there is a lag between employees using benefits and feeling the tax effect of them.

The new rules will affect the way ‘benefits in kind’ schemes are reported. The changes will also significantly impact how and when these benefits are taxed.

What’s Changing?

HMRC will make it mandatory for companies to payroll most benefits—meaning they must be reported and taxed in real time through payroll, rather than retrospectively via the P11D.

Employee benefits such as the below will be captured within this:

• • Private Medical Insurance (PMI)
  • Cash plans
  • Dental insurance
  • Health assessments
  • Critical illness
  • Electric Vehicle (EV) salary sacrifice schemes
  • Gym memberships

Some benefits should continue being reported to HMRC via P11D:

• • Interest-free or low-interest loans
  • Living accommodation provided by the employer
  • Any other benefits not yet eligible for payrolling under HMRC guidance

What does this mean for employees?

Payrolling benefits means that employees will be taxed in real time across any P11D benefits and will be able to clearly view deductions on their monthly payslip. The key points to note are:

• • The value of their P11D benefits is divided across the tax year (12 months)
  • The relevant tax will be deducted from their monthly pay
  • These benefits will be clearly visible on payslips
  • Employees won’t receive a P11D for these benefits going forward

For both employer and employee, this approach should:

• • Simplify reporting (fewer P11Ds needed)
  • Improve accuracy (real-time tax deductions)
  • Enhance transparency, as everything appears on an individual’s payslip

In theory, these new rules make sense, but it feels as though there is a disconnect between HMRC’s changes and the general public’s current awareness of them. One thing is therefore likely, and that is that HR teams will be fielding a lot of employee queries from April 2026. Our advice to our clients when they make this change will be to get ahead of things and proactively brief employees about what to expect from their next payslip, before a trickle of emails becomes a potential deluge.