It’s the final countdown!

Just a few more days to go until the end of 2024-25 and your chance to register to payroll benefits from 6 April 2025.

If this is something you’ve been thinking about, you only have until 5 April to make that decision and to take action.

Payrolling benefits means that the tax is collected through the payroll. This means that tax code amendments for benefits must be switched off to avoid the benefit being taxed twice. That is why the registration process must be done before the new tax year begins on 6 April.

Currently, tax on benefits in kind, such as company cars, is collected through employees’ tax codes. If HMRC knows about the benefit before the start of the tax year, they will ‘code the benefit out’ and issue the employee a new, lower tax code. The result is that the tax due on the benefit for the year is collected over the whole of the new tax year.

What happens in practice, though, is that tax code adjustments include benefits for earlier tax years as well as the new tax year. This is because P11Ds are sent in to HMRC once a year in July, which is after the end of the tax year when the employee had the benefit.

Given these challenges, payrolling benefits offers a more flexible alternative and gives you the control to make changes as they happen. By processing benefits in real time through payroll, tax is collected evenly throughout the year, eliminating the risk of tax code discrepancies and unexpected adjustments.

Why should you do it?

No more P11Ds! (Except for loans and accommodation)

No more paying tax in arrears, so no more tax code changes for benefits!

Most importantly, 2025-26 will be the very last year that P11Ds will be used because from 6 April 2026, payrolling benefits will be mandatory.

So, why not try it out with one or two benefits so you can see how it will work?

If you want to talk about Payrolling Benefits, please get in touch.

Contact the team