Unlock Hidden Savings: Your Guide to Payroll Benefits in Kind

Accountants Chester – Tax Tip No. 61

Looking to simplify your employee benefits administration in Chester? Payroll benefits offer a convenient way to handle taxable benefits in kind (BIK) for your employees.

What are payroll benefits?

Instead of reporting BIKs on employees’ P11Ds at the end of the tax year, you can “payroll” them, treating them as part of their regular salary. This simplifies the process for both you and your employees.

Key Points about Payroll Benefits:

• Registration: Employers must register to payroll benefits before the start of the tax year they wish to implement it.
• Ongoing registration: Once registered, benefits remain so until deregistered before the following tax year.
• Tax treatment: Payroll benefits are treated as additional salary for tax purposes, impacting gross pay and tax calculations.
• National Insurance: Payroll benefits are generally exempt from Class 1 National Insurance, but employers must include them in their Class 1A liability.
• Not all benefits qualify: Currently, employment-related loans and living accommodation cannot be payrolled.

Registering New Benefits:

With the 2024/25 tax year approaching, review the benefits you wish to payroll. If it’s the first time, register online before April 6, 2024, using HMRC’s service: https://www.gov.uk/guidance/paying-your-employees-expenses-and-benefits-through-your-payroll

Reviewing Existing Registrations:

If you already payroll benefits, check if you want to continue for the 2024/25 year. If not, deregister before April 6, 2024, using the same HMRC service.

Looking Ahead:

Payroll benefits will become mandatory from April 2026. Consider transitioning now to simplify administration and avoid future P11D filing (though P11D(b) remains required).

Need Help?

Accountants Chester can assist you with navigating payroll benefits and ensuring compliance with HMRC regulations. Contact us today for a consultation.