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The Chartered Institute of Taxation (CIOT) has warned that there is less than a year to go before all employers will be required to tax benefits-in-kind via the payroll. It has stressed that the change will have a significant impact on employers and employees alike.
Countdown to taxation of benefits-in-kind via the payroll underway
There is now less than a year to go before all employers must tax benefits-in-kind via the payroll, the CIOT has warned.
Benefits-in-kind are non-cash benefits provided by employers to employees or directors. Common benefits include company cars, private medical insurance and gym membership.
While the benefit is paid for by the employer the recipient is required to pay Income Tax and potentially National Insurance contributions (NICs) on the value of the benefit, as if this value had been added to their salary.
Additionally, the employer must pay employer NICs on the value of the benefit. According to HMRC more than 3.5 million employees receive a taxable benefit-in-kind.
Currently, most employers compute the value of a taxable benefit after the end of the tax year and report it on a P11D form to HMRC and the employee. This means the employer potentially has up to 15 months to calculate, verify and report the value of a benefit.
From 6 April 2027 it will be a legal requirement to report and pay Income Tax and NICs on most benefits-in-kind and taxable expenses payments via payroll rather than waiting until the end of the tax year.
Sarah Hewson, Vice-Chair of the CIOT's Employment Taxes Committee, said: 'Mandatory payrolling of benefits will have a big impact on employers, employees and software providers. Don't leave it too late to get ready for this change.'
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Higher energy prices could leave British households worse off this year
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New employment law creating recruitment challenge
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UK businesses should apply now for Vaping Products Duty
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ESSENTIAL TAX DATES FOR MAY
3 May
Deadline for submitting P46(Car) for employees whose car/fuel benefits changed during the quarter to 5 April 2026.
19 May
PAYE, Student loan and CIS deductions are due for the month to 5 May 2026.
31 May
Deadline for forms P60 for 2025/26 to be issued to employees.
QUOTE OF THE MONTH
'Persistently weak domestic activity and a looser labour market imply that rate hikes are relatively less likely in the near term, but they could still be a possibility if the conflict escalates significantly.'
Martin Sartorius, Lead Economist at the Confederation of British Industry (CBI), commenting on the UK rate of inflation rising to 3.3%.
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