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Changes to employee expenses and benefits in kind

| Damon Tunnicliffe | 18 January 2024

The UK government recently announced measures as part of its plans to simplify and modernise the UK tax system, including planned enhancements to the non-reimbursed expenses service and mandating the payrolling of benefits in kind.

Non-reimbursed expenses

Presently, employees claiming tax relief on their expenses submit claims through either online services or via digital or paper forms, which means they have to be manually processed.

Going forward, the government is designing a new, online service for employees to claim tax relief on all their expenses in one place. This should simplify processing and it may mean that employees can get tax relief sooner.

Further details on this are expected later this year.

Payrolling benefits in kind

To reduce the number of people needing to contact HM Revenue and Customs (HMRC), those reporting and paying Income Tax and Class 1A National Insurance Contributions (NICs) will need to do so via payroll software from April 2026.

With four million end-of-year returns being submitted to HMRC each year, this would have a clear benefit to both businesses and the HMRC in reducing the administrative burden upon them.

Under the current process, employers can report benefits for taxation by submitting a P11D form but they can also register for payroll benefits so they can be taxed in real-time through PAYE, with some exceptions.

However, even if the benefits are taxed through payroll, the submission of a P11D(b) form is still a requirement to report the liability of Class 1A NICs, at present, making the system more complicated than it needs to be.

HMRC says it will engage with stakeholders to discuss this proposal to inform both design and delivery and the draft legislation which will be published later this year. HMRC will also work with industry experts to produce guidance, which will be made available before 2026."

The government's communication can be read in full here.

If you have any questions please don't hesitate to contact any of our payroll team.


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