In a significant move towards digitalising tax affairs, the Government has announced that employers must report and pay income tax and Class 1A National Insurance contributions (NICs) on benefits-in-kind using payroll software from April 2026.
This initiative is part of a broader Government ambition to fully digitalise the reporting of benefits-in-kind, aiming to simplify the tax process for millions.
The new mandate is expected to streamline the tax affairs of approximately three million people, significantly reducing the need for direct contact with HMRC.
For employers, the change promises to lift a considerable administrative burden. The digitisation and simplification of this process are set to eliminate the requirement for four million end-of-year returns currently submitted to HMRC.
Announcing the measure in its latest simplification update, HMRC said it is committed to engaging with stakeholders to refine the proposals, ensuring that the design and delivery of this new system are well-informed and practical. As part of the standard tax legislation process, draft legislation detailing this mandate will be published later in the year.
Employers and taxpayers can expect to receive further details on this development through standard communication channels, including employer bulletins.
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