Payrolling Benefits in Kind

Benefits in kind (BIK) are a particularly popular part of many employees’ salary packages. These often contribute to the overall decision making when accepting or declining a job role. What’s interesting though, is that these can help employees and employers alike. Complicating these benefits is that some require a tax payment to Her Majesty’s Revenue & Customs (HMRC).

What are benefits in kind?

BIK are any and all benefits that a company director or employee receives from their employer. Not all are taxable, but those that are must be properly declared to HMRC.

Company cars, Medical or dental insurance and childcare vouchers are all examples of BIK, but there are many more. The Government list employer benefits in a handy A-Z directory that employers may need to pay tax and National Insurance on.

Payrolling benefits in kind

HMRC introduced benefits in kind in payroll in 2016. The idea was to make the entire process simpler for declaring and paying tax on the benefits. Previously an employer had to submit a P11D.

What are HMRC saying?

HMRC are encouraging more employers to payroll employee BIK rather than declaring benefits on the end of year P11D. They have included guidance on registering to use the scheme in their latest employer bulletin.

How do employers register?

If employers haven’t already done so they should register online now or before 5 April 2022 to payroll employee benefits for the 2022/23 tax year.

The advantages of payrolling benefits in kind are:

  • employers no longer need to submit P11D and P46(Car) forms to HMRC
  • simpler PAYE codes mean HR teams receive fewer queries from employees regarding tax
  • tax deductions in monthly payroll will be more accurate
  • tax codes for individuals should change less frequently
  • fewer forms for employers to complete at year-end

What if you are not ready to move to payrolling?

If you are not yet in a position to move to payrolling you can still move away from legacy paper P11D forms by submitting them online. You can submit them in one click without worrying about posting them to HMRC. It is also a useful first step towards payrolling of B| and bringing your payrolling processes into the digital age.

Need to find out more?

For more information around this complex issue, please speak to a member of our payroll Services Team or call them on 01903 234094.