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Payrolling benefits - the basics

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Summary

Basic information about payrolling benefits when using Sage 50 Payroll.

Description

You can either complete a form P11D for each employee who receives a benefit in kind (BIK), or include the cash equivalent value of the benefit in the payroll and deduct the required amount of tax. If you choose to payroll the cash equivalent of the benefits, you can now process this using Sage 50 Payroll.

Some types of benefits can't be payrolled, for example, accommodation, beneficial loans or credit tokens and vouchers.

Resolution

Register to payroll your benefits

If you want to payroll your benefits rather than record the information on a P11D, you must first register with the HMRC Payrolling Benefits in Kind (PBIK) online service.

 

To payroll your benefits for the 2024/25 tax year, you must register by 5 April 2024. If you forget to register by this date, you can use Sage 50 P11D to record your BIKs and report the information to HMRC. Find out more >

For more information, visit the HMRC website.
If you payroll your benefits, you still need to produce the P11D(b) form, however it's not possible to produce the form using Sage 50 Payroll. Read more >

Calculate your taxable benefits

To calculate the taxable benefit, you must divide the taxable amount of the benefit by the number of tax periods in the year. You should include the it in the employee's normal pay.

For example, if the employee is paid £1,000 each month and the employer provides health insurance at a cost of £1200 a year, the taxable benefit to include in the employee's monthly pay is £100.

= £1200 / 12 = £100

You can only payroll benefits once you've applied to HMRC and they've given authorisation. When you apply, you must let them know which benefits you'll payroll and the employees affected.


After you register to payroll benefits

You must:

  • Write to your employees to explain what payrolling benefits is, how it works and what it means for them.
  • Include the benefit's cash equivalent in their pay as a taxable amount.
  • Provide your employees with the following information:

    • A description of the benefits payrolled in the tax year, for example medical insurance and the cash equivalent of each benefit that has been payrolled in the tax year.

  • Submit a P11D to HMRC for any benefits that you don't payroll.

For further information about payrolling benefits in kind, please refer to HMRC's guidance or contact HMRC directly on 0300 200 3200.


Next steps

You can also find details on how to set up your benefits in kind from our support guide.