LondonSt Albans

Payrolling Benefits in Kind: Adjustments and Changes

How do you make a payroll adjustment?

Start by collating information about the benefits and calculating the cash equivalent. The calculation is completed in the same way as reporting on a P11D. If you are not sure about the value at the start of the tax year, make an estimate and then adjust it when the exact value is known.

Then work out how many pay days there are in the tax year. Most employees are paid weekly, monthly or 4-weekly. Divide the annual value by the number of pay days. This is the taxable amount to add to the first payroll for the tax year 2022/23 and any subsequent payrolls.

 

Example: an employee has private medical with an annual cash equivalent value of £1200

Weekly = 52 pay days £1200 / 52 = £23.08 taxable pay to be added each pay day

Monthly = 12 pay days £1200 / 12 = £100.00 taxable pay to be added each pay day

Weekly = 13 pay days £1200 / 13 = £92.31 taxable pay to be added each pay day

 

What can you do if an employee benefit value changes?

This can happen if the employee gets a new company car or the private medical premiums change when the renewal anniversary doesn’t coincide with the start of the tax year. You need to work out the revised taxable value using the following steps:

  1. Work out the old cash equivalent, from the start of the tax year up to the day before the value changed
  2. Add this to the new cash equivalent, from the date the value changed to the end of the tax year
  3. Deduct the amount payrolled to date in the tax year
  4. Divide this remaining taxable amount by the remaining pay days left in the tax year
  5. Add the new amount as the taxable pay to future payrolls

What if the wrong amount has been payrolled?

If the wrong taxable amount has been payrolled, recalculate the amount to payroll by using the following steps:

  1. Work out the correct cash equivalent for the full tax year
  2. Deduct the amount payrolled to date in the tax year
  3. Divide this remaining taxable amount by the remaining pay days left in the tax year
  4. Add this new amount as the taxable pay to future payrolls

Do I need to update the payroll if an employee leaves?

If an employee leaves, you should re-calculate the annual value and ensure the final payroll has the correct value payrolled to date. If the employee has left and there is part of the benefit which is untaxed, there are two options:

(1) Include the balance on the FPS

(2) Include the untaxed balance on form P11D

HMRC provides a useful guide which you can refer to by clicking here.

As your payroll provider, we are here to support you with any questions or assist in calculating the cash equivalent. Please contact Devila Rabadia or Pat Strods in the first instance or please complete your details below and we will get back to you.  

 

Payroll Enquiry

Name(Required)
Company Name