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Taxable employment benefits from April 2026

18 April 2024

From April 2026, the UK government will mandate real-time reporting and payment of taxes through payroll software, ending the filing of P11Ds and P11D(b)s. This change aims to simplify the tax system for employers and employees.

New Mandate Starting April 2026

Starting April 2026, the government mandates Income Tax and Class 1A National Insurance Contributions reporting and payment through payroll software. This significant change simplifies the tax system and reduces administrative tasks for employers and employees.

The 2025-26 tax year marks the last year for employers to file P11Ds and P11D(b)s with HMRC in most cases. From April 2026, real-time collection of tax on employment benefits replaces collection through tax codes in arrears. Real-time collection of Class 1A National Insurance contributions also starts, eliminating the need for 4 million end-of-year returns.

Modernizing the Tax System

This move towards real-time reporting and payment is a part of a broader effort to modernize and streamline the tax system. It aims to make it easier for businesses to understand and meet their tax obligations, reducing the risk of errors and late payments.

HMRC plans to engage with stakeholders to discuss proposals, inform design and delivery decisions, and draft legislation. This legislation will be published later in the year as part of the usual tax legislation process. HMRC will also collaborate with industry experts to produce guidance available before 2026.

Benefits for Employees

In addition, the move to real-time reporting and payment could also have benefits for employees. For example, it could result in more accurate tax deductions from their pay, reducing the likelihood of under or overpayments.

Overall, this change represents a significant step forward in the government’s efforts to modernize the tax system. It is expected to bring benefits for businesses, employees, and the government alike, contributing to a more efficient and effective tax system. The government and HMRC will continue to work closely with stakeholders to ensure a smooth transition to the new system.

Source: HM Revenue & Customs Tue, 16 Apr 2024 00:00:00 +0100

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