Mandatory payrolling of benefits in kind delayed

News that the government has decided to delay the mandatory payrolling of benefits in kind has been very much welcomed.

The reporting and paying of Income tax and National Insurance on benefits through payroll software has now been deferred from April 2026 to April 2027.

Penalties will also not be charged for errors in the first year, while two types of benefits have been delayed indefinitely – employer provided loans and living accommodation.

The Association of Taxation Technicians (ATT) welcome this decision, but says that the government must use that time to simplify the plans and help employers prepare.

Emma Rawson, ATT Director of Public Policy, explained, “This is a welcome announcement, and it is especially reassuring to see that the Government has listened to the concerns of the tax and payroll profession and software providers.

“Mandatory payrolling of benefits will have a big impact on employers, employees and software providers.  It is therefore welcome that extra time is available for all parties to prepare.

“Inevitably, mistakes will happen while employers get up to speed with the new requirements. We therefore welcome today’s announcement that penalties will not be charged for errors in the first year of mandatory payrolling of benefits unless there is evidence of deliberate non-compliance.

“Two types of benefit in kind – employer provided loans and living accommodation – were originally going to be brought in a year later than other benefits, but the information published today merely says a timeline will be set out in due course.  We would encourage the Government to use this additional time to look at how the taxation of employer provided living accommodation could be updated and simplified to better facilitate payrolling.”

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