Payrolling benefits to be mandatory from 2026

The reporting and paying of income tax and class 1A National Insurance contributions (NIC) on benefits-in-kind via payroll software is to be mandatory from April 2026 HMRC has announced.

In a new document Simplification Update it is stated that this will ‘reduce administrative burdens for thousands of employers and HMRC by simplifying and digitising the process of reporting and paying tax on all employment benefits’. Further it will remove the need for four million end of year forms.

Also in the update HMRC says it intends to simplify the process for employees claiming tax relief on their expenses and for HMRC to process claims automatically. It receives 1.1 million such claims each year. The government is designing a new online service for employees to claim tax relief on all of their expenses in one place.

The government also confirmed that it will legislate...