Payrolling benefits

Summary

Basic information about payrolling benefits when using Sage 50 Payroll.

Description

When an employee receives benefits 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 Sage 50 Payroll and deduct the required amount of tax

 NOTE: You can't payroll some types of benefits. For example, accommodation, beneficial loans or credit tokens and vouchers. If you're unsure whether you can payroll a benefit, contact HMRC for advice. 

Register to payroll your benefits

Register with the HMRC Payrolling Benefits in Kind (PBIK) online service before the start of the tax year you want to begin payrolling benefits.

To payroll your benefits for the 2025/26 tax year, you must register by 5 April 2025. If you don't register by this date, you can't payroll benefits in this tax year.

 NOTE: If you've already payrolled benefits but haven't registered with HMRC, contact HMRC for advice. 

If you're not payrolling benefits, you can use Sage 50 P11D to record your BIKs and report the information to HMRC. To find out more about Sage 50 P11D, go to Sage.com.

For more information, go to GOV.UK.

If you payroll your benefits, you still need to produce form P11D(b). However, it's not possible to produce the form using Sage 50 Payroll. Find out more about payrolling benefits vs. P11D.

Calculate your taxable benefits

To calculate the taxable benefit, divide the taxable amount of the benefit by the number of tax periods in the year. Include it in the employee's normal pay.

For example, you pay the employee £1,000 each month and provide 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

Only payroll benefits once you've applied to HMRC and they've authorised it. When you apply, 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 a description of the benefits payrolled in the tax year. For example, medical insurance and the cash equivalent of each benefit you've payrolled in the tax year
  • Submit a P11D to HMRC for benefits that you don't payroll

For further information about payrolling benefits in kind, go to GOV.UK or contact HMRC directly on 0300 200 3200.

Next steps

You're ready to set up your benefits in kind.

 

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Solution ID
200427112335266
Last Modified Date
Thu Sep 04 14:00:38 UTC 2025
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