What you need to know about registering for payrolling benefits

As we approach the start of a new tax year, it’s a great opportunity to review how employee benefits are managed on your payroll. One option many employers are choosing is payrolling benefits, a government supported system that allows benefits in kind to be taxed through payroll rather than reported separately on a P11D.

This approach can simplify administration, improve accuracy, and give employees greater clarity over their tax throughout the year.

What is payrolling of benefits?

Payrolling benefits means that the value of certain taxable benefits, such as company cars, private medical insurance, or other perks, is processed directly through payroll each pay period. Rather than completing P11Ds at the end of the tax year and making later PAYE adjustments, the employee’s tax code is updated in real time. This ensures the correct tax is deducted as they are paid.

A P11DB submission is still required at tax year end to declare employers Class 1A national insurance but this can usually be done via your payroll software. For employees, this means less paperwork and fewer unexpected tax adjustments. For employers, it reduces administrative effort and helps ensure ongoing compliance with HMRC requirements.

This will become mandatory in April 2027

How to register for payrolling benefits

To start payrolling benefits, employers must register with HMRC. This is something Gravita can help with. HMRC recommends registering early in the tax year to allow plenty of time for a smooth transition. You must register before the beginning of the tax year you plan to payroll the benefits.

Upcoming changes to payrolling

From April 2026, several important changes are planned:

• Expanded scope of benefits that can be payrolled
• Improved real time tax adjustments within employee tax codes
• Mandatory payrolling for certain benefits for larger employers

These changes make it especially important for employers to review their current benefits processes and ensure payroll systems are ready.

Why consider switching to payrolling now?

Even if you currently report benefits using P11Ds, moving to payrolling offers several advantages:

• A smoother employee experience with more accurate tax deductions throughout the year
• Reduced year end workload, with fewer P11Ds and reconciliations
• Improved compliance, as HMRC increasingly encourages payrolling
• Simpler payroll processing, with fewer manual adjustments

Next steps for employers

To prepare for the changes ahead, we recommend that employers:

1. Review all benefits currently offered to employees
2. Check which benefits are eligible for payrolling under the updated rules
3. Ensure payroll systems (or payroll providers) can support payrolled benefits
4. Register with HMRC if you are not already payrolling benefits
5. Communicate any changes clearly to employees so they understand how their benefits will be taxed

Payrolling benefits is a simple yet effective way to streamline payroll processes while giving employees greater clarity over their tax. With further changes on the horizon, now is an ideal time to review your approach and ensure you’re well prepared.

If you’d like support reviewing your benefits, registering with HMRC, or preparing for the upcoming changes, the Gravita payroll team is here to help.