Payrolling vs P11Ds: What Employers Need to Know
The deadline for submitting P11Ds about money owed for the tax year ending 5 th April 2025 to HMRC was the 6 th July and Class 1A National Insurance paid by 22 nd July. If employer have still done either of these they need to submit and pay as soon as possible to avoid further penalties.
If you have previously completed P11Ds but have nothing to report for the previous year you still need to report to HMRC that there is nothing to return. The is a specific form to complete to let HMRC know there is no Class 1A National Insurance due.
If you currently use P11Ds rather than payrolling then you can also register to report via payroll for the 2026/27 tax year now. Currently you should register to payroll benefits in the preceding tax year and informal payroll of benefits may or may not be permissible.
Informal payroll of benefits is where the benefits are processed via payroll but an employer has not yet registered with HMRC. This used to be fine and suggested in the HMRC guidance but a P11D was still required. In the most recent Employer’s Bulletin it is says HMRC no longer accepts payrolling of benefits. Unfortunately there are different parts of HMRC producing publications to enforcing to answering customer phone calls and we believe informal payrolling of benefits does still exist in the HMRC employment manual. However, it is probably best to use P11Ds until thetax year you are registered to start payrolling.
Payrolling of benefits is no longer going to be compulsory from April 2026 and has been pushed back to April 2027. We have a few clients that have had some odd issues from HMRC related to benefits so the delay is probably good.
Once an employee that has previously had P11Ds starts having their benefits processed via payroll their tax code should raise, increasing the personal allowance. This is because payments on account should be removed as the tax will now be collected in real time and be more
accurate. This usually happens although the odd employee may still need to contact HMRC. Even if the benefits are processed via payroll there is currently still a requirement for the employer to submit a P11D(b) declaring the Class 1A National Insurance liability. This is because
there may be other benefits not reported on payroll that need to be declared.
Reporting benefits via payroll is fairly straightforward although cars are still a pain point needing a lot of detail. If you do not currently payroll your benefits and wish to, make sure to register before April ready for the next tax year.
Useful Resources:
https://www.gov.uk/guidance/paying-your-employees-expenses-and-benefits-through-your- payroll
https://www.gov.uk/calculate-tax-on-company-cars
https://www.gov.uk/guidance/declare-no-return-of-class-1a-national-insurance-contributions