There is already an optional system in place (at present, this requires HMRC’s agreement) where employers can deduct the income tax from employees on these benefits by withholding the tax via their regular payroll scheme. The principle behind this is to reduce the employer’s reporting burden so that P11Ds only need to be submitted for benefits that cannot currently be “payrolled” (the last two items listed above). The employer is however still required to submit a Form P11D(b) to HMRC.
As part of the Government’s policy to simplify the tax system they have decided to make this compulsory and therefore the payrolling of benefits will become mandatory from April 2026 and P11D reporting will be abolished. For employers who are using the current system of payrolling their benefits they will no longer be able to pick and choose which benefits can be payrolled, all benefits will need to be treated the same way, via the regular payroll.