Articles13 Dec 2024
The consequences of higher employer’s national insurance contributions
The impact of the Budget’s increases in national insurance contributions (NICs) are not limited to employers.
Articles
HMRC have announced that reporting and paying income tax and Class 1A National Insurance Contributions (NIC) on benefits in kind through payroll will become mandatory from April 2026. All employers will be required to process taxable benefits through the payroll... Read more
HMRC have announced that reporting and paying income tax and Class 1A National Insurance Contributions (NIC) on benefits in kind through payroll will become mandatory from April 2026.
All employers will be required to process taxable benefits through the payroll system, making them subject to PAYE (Pay As You Earn) tax at the time the benefit is provided. This includes benefits such as company cars, private medical insurance, and other non-cash benefits.
The value of the benefit will be included in the employee’s taxable pay each pay period, ensuring taxes are deducted in real-time rather than through end-of-year adjustments or P11D forms. The move is expected to reduce the need for P11D forms (which report benefits to HMRC after the end of the tax year) since benefits will be taxed as part of regular payroll processing. Employers and employees will have a clear understanding of tax liabilities throughout the year.
These changes reflect the UK government’s ongoing efforts to streamline tax processes and ensure greater transparency and accuracy in the taxation of employee benefits. Employers and employees alike should start preparing well in advance to ensure a smooth transition by April 2026.
Preparing for the Change:
Employers will need to:
Employees should:
THE AUTHOR
Senior Manager, Payroll
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