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Government mandates payrolling of benefits in kind

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The Government has announced its decision to mandate the reporting and payment of income tax and Class 1A National Insurance contributions (NICs) on benefits in kind through payroll software, starting from April 2026. This initiative builds on its commitment to digitalisation in a way that will benefit individuals and thousands of employers as well as HMRC.

Although information is limited at the moment, here’s what we know.

Simplified tax affairs for millions

The mandating of payrolling benefits in kind is expected to simplify the tax affairs of three million individuals, thus reducing the administrative burden on taxpayers. By incorporating this into payroll software, the Government aims to make the reporting and payment of income tax and NICs on benefits in kind a seamless process, which will remove the need for four million end-of-year tax returns

Stakeholder engagement

HMRC plan to engage with stakeholders to discuss the proposals. We expect draft legislation to be published later in the year as part of the standard tax legislation process.

Tax regulations are complex so, as part of the process, HMRC will collaborate with industry experts to produce comprehensive guidance. This information will be made available well in advance of the 2026 implementation date and will provide employers and payroll professionals with the resources to navigate the new requirements.

We’ll also keep you up to date through regular blogs, our employer bulletin and, where relevant, targeted mailings to our current clients.

Need help?

If you have any queries, or would like to discuss early implementation, please get in touch with your usual larking Gowen contact. You can find contact details on the Our People section of the website or email enquiry@larking-gowen.co.uk.

Tessa Brown and Dannielle Chapman

 

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