Payrolling benefits can reduce the administration involved in preparing P11D’s and aid employees to pay the tax due on benefits in real time – take a look at our article Payrolling Benefit in Kind Part 1 on registering and reducing administration.
Once registered you must tell your employees what will happen during the first year. The areas to cover in the communication are as follows:
- The employees tax code will change to take out the adjustment for their benefits in kind
- The adjusted amount through payroll each month and they will pay tax on that amount
- At the end of the tax year you will tell them how much taxable benefit they have had in the year and what it was for
If you have a new employee, you must tell them how the benefit will be taxed. Tell the new employee:
- The tax code may be amended to adjust any benefits from previous employments
- The benefit will not be included in their tax code
- Any underpaid tax due will still be collected by their existing tax code
By 1st June following the end of the tax year, provide a written confirmation to the employee. This needs to explain that you are payrolling benefits and that they will not be taxed twice. This can be done by payslip, email or letter. The details to include are as follows:
- Details of the benefits you have payrolled. This can include what the benefits are, the value, the cash equivalent and which ones have been subject to PAYE tax
- The amount you have payrolled for optional remuneration (OpRA)
- Details of benefits you have not payrolled (if applicable)
If you would like help with the communications to the employee, please complete your details below.
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