Mandatory reporting of benefits is coming soon

Commencing April 2026, it will become mandatory for UK employers to integrate employee benefits, such as company cars or health insurance, into their payroll system.

This alteration aims to streamline tax administration for employers by taxing these benefits through the payroll, eliminating the need for separate reports.

What are your new responsibilities?

With this change, selecting which benefits to report through payroll and which to report separately will no longer be an option – all must go through payroll.

Consequently, you will need to:

• Monitor your data with increased accuracy and diligence.
• Assume greater responsibility in managing PAYE, which will undergo more thorough scrutiny.
• Clearly communicate these changes to your employees to ensure they comprehend the taxation of their benefits.
• Verify the compatibility of your payroll software with these changes and make necessary adjustments.
• Navigate the complexities of managing specific benefits, such as loans or company cars, under this new regime.

Employees may notice fluctuations in their monthly cash flow due to the inclusion of benefits in kind in their payroll so it’s important to make them aware of the changes in advance.

This adjustment may also result in variable take-home pay, particularly in the first year following this change.

Practical steps to manage the changes

To navigate these modifications with ease, consider the following actions:

• Begin preparations immediately by evaluating your existing payroll processes and benefits management for required adaptations.
• Confirm that your payroll software supports the inclusion of benefits in kind. Plan for any essential upgrades and conduct tests well ahead of time to circumvent last-minute difficulties.
• Educate your payroll and HR teams on the new mandates, including changes in tax calculations and reporting.
• Formulate a comprehensive communication strategy to inform your employees about the impact of these changes on their pay and taxation.
• Encourage employees to reassess their personal finance and budgeting strategies in light of potential alterations in their monthly net pay.

By adopting these measures, you can facilitate a seamless transition to the updated system and ensure adherence to the revised tax regulations.

Preparation ahead of time and transparent communication with your employees are vital to effectively manage this transition, as well as liaising with a payroll expert.

We are here to assist you in understanding these changes and identifying potential challenges to keep your business in compliance.

Should you need guidance on payroll, please feel free to reach out.