For as long as I can remember forms P11D (Returns of Benefit in Kind) have been a mainstay of our tax system. I recently googled when they first came into existence and surprisingly it was as far back as the 1960s.
By Chris Davies
The original purpose was to tax benefits in kind paid to directors or higher paid employees (those earning over £8,500 per annum) and I do recall as a trainee preparing P11Ds dreaming of earning such a giddy salary.
But after 45 years without alteration the concept of £8,500 being the measure of a higher paid employee has long since past.
But there is one major change on the horizon. From April 2026 HMRC plan to replace the P11D with payrolling benefits, so that the employee pays the right amount of tax under PAYE throughout the year.
The aim is to reduce administration for both employer and HMRC, although forms P11Db will still be required to report the Class 1A liability arising on the benefits.
There will be a lot of consultation required before 2026 to establish how some of the finer points will work eg interest on beneficial loans, payments for employees for making good private use, etc, so it will not be an easy conversion.
With just over 2 years until its planned implementation the timeline for software suppliers to be ready does seem challenging, particularly as HMRC has already placed extra work on them to be ready for the first planned round of Making Tax Digital in April 2026.
If you would like any advice about how the changes may affect you or how best to prepare for them please do get in touch.
