We are informing all employees about an important change in how employee benefits will be administered with any Salary Sacrifice starting from 1st April 2027.

The Trust will implement a process called Payrolling of Benefits, regulated by HMRC, to simplify the way you pay tax on your benefits. This change is different from the traditional way that the Trust has operated over the years. Please read the below sections to further understand how the change will affect you.

We have also provided FAQ's for further guidance.

Payrolling of Benefits means that the tax due on your benefits in kind will be deducted from your salary in real time. This new process will replace the current P11D forms issued at the end of each financial year.

  • Real-time tax adjustment: Your tax will be adjusted in the same tax year you receive the benefit.
  • No tax code adjustments: There will be no need to adjust your tax code in the following tax year.
  • Elimination of P11D forms: The requirement for P11D forms will be removed.

  • For the tax year 2027/2028, the tax due on your benefits will be administered through your salary in real time.
  • Any benefits received in the tax year 2026/2027 will be reported to HMRC via a P11D, and a revised tax code will be issued to recover any applicable tax throughout 2027/2028. This is standard practice for the first year of transition.

Q: What are Benefits in Kind (BIK)?

A: A Benefit in Kind is any non-cash benefit of monetary value that is provided by your employer, for example, salary sacrifice lease car.

Q: What is payrolling of benefits?

A: Payrolling of Benefits is a process that enables the collection of tax due on the benefits in kind you are in receipt of through your salary in real time.

Q: How does payrolling of benefits work?

A: There are different rules for different benefits in kind.

Lease cars – 1/12th of the annual taxable benefit will be added to your taxable pay each month. For example, if the annual taxable benefit is £2400, your monthly taxable pay will be increased by £200. Taxable pay is the amount liable for the rate of tax you pay. If you are in the 20% tax bracket, then in this example you will pay an extra £40 per month in tax.

Home electronics – The home electronics benefit is collected in the tax year you receive the item. For example, if you order from the home electronic scheme in June the first salary sacrifice deduction will be taken from your July pay. The taxable aspect of the benefit is then applied to your salary between July and March. If you purchased a TV over 24 months at a value of £1000.00, the taxable aspect would apply to your salary over 9 months at £111.11 per month. The salary sacrifice will be deducted over the 24-month period.

Q: Will I still get a P11D?

A: You will receive a P11D form for tax year 2026/2027 and this will be the final P11D you receive. From April 2027 the benefit will be included within your salary and detailed on your payslip (this is covered in a question below).

Q: I must complete a tax return at the end of each tax year which I need a P11D for. How do I include the benefit on my tax return for future years submissions?

A: The benefit will be included in your taxable pay earnings detailed on your P60 statement and your cumulative pay balances detailed on the bottom of your payslip.

Q: How will the HMRC be informed of the benefits I receive through my employer?

A: The cash equivalent (which is the taxable value of your benefit) is reported to HMRC monthly using the RTI process (Real Time Information – legal requirement for all employers). Payroll complete this process as part of the monthly processing.

Q: What is the impact of moving to payrolling of benefits and how does it affect me?

A: In the first year, there will an impact due to the transition of moving to the new process. The reason for this is you will be paying the tax of your benefit in real time for tax year 2027/2028 and when the P11D information is submitted for tax year 2026/2027, you will receive a revised tax code for the tax that was due on your benefit(s) in the last financial year.

Q: Can I opt out of payrolling of benefits?

A: No, when an employer registers with the HMRC to start using payrolling of benefits all applicable benefits must be administered through this process. Individuals are not able to opt out of this process.

Q: How do I know what has been adjusted in my pay due to moving to payrolling of benefits?

A: There is a section on your payslip which is called “MESSAGES FROM EMPLOYER”. This will detail the amount that your taxable pay has been increased by each month. This amount will be subject to either 20%, 40% or 45% tax depending on your personal circumstances.

MESSAGE FROM EMPLOYER

The taxable value of (GB BIK Car and Car Fuel) is …………… Tax will be charged on this amount at your current tax rate. (This is the message for salary sacrifice of lease cars)

The taxable value of (GB BIK Assets Transferred) is …………… Tax will be charged on this amount at your current tax rate. (This is the message for salary sacrifice of assets transferred schemes such as home electronics)

Payrolled Benefits of £…………. are included (This is the message for all other applicable salary sacrifice schemes).

Example message view on a payslip

 

 

Q: I have received a tax code notification change for tax year 2027/2028 is this correct?

A: Yes, this could be correct as the HMRC has been notified that your benefits will be payrolled effective from April 2027. The reason for the tax code change is the HMRC no longer needs to account for the benefit in kind in your tax code as the tax due will be deducted in real time. Unfortunately, the Payroll department is unable to provide any guidance as to why your tax code is different to the standard tax code for 2027/2028. If you have any queries regarding your tax code please contact the HMRC, contact details can be found https://www.gov.uk/government/organisations/hm-revenue-customs/contact/income-tax-enquiries-for-individuals-pensioners-and-employees

 

Q: How is the tax deducted for mileage reimbursement under the payrolling of benefits process?

A: The tax applicable to the rate at which you are reimbursed for business travel will be deducted from your pay as it is paid.

 

Mileage reimbursed for using a private vehicle (business miles) – HMRC have set out the reimbursement rates that are not subject to tax. The rates can be found Expenses and benefits: business travel mileage for employees' own vehicles: Rules for tax - GOV.UK. If you are reimbursed at a rate above 45 pence (for the first 10,00 miles), then anything over this amount is subject to tax.

For example,

Number of miles to be reimbursed – 100

Reimbursement rate – 59 pence

Total amount to be paid before tax - £59.00

Not subject to tax - £45.00

Subject to tax - £14.00

Mileage reimbursement for using company car (lease car miles – salary sacrifice cars) - HMRC have set out the reimbursement rates that are not subject to tax. The rates can be found Advisory fuel rates - GOV.UK. If you are reimbursed above the rates set out in the link, anything above the HMRC rate is subject to tax. The example calculation method above applies, using the rates in the link and the rate of reimbursement set by your employer.

The liability for tax remains the same with payrolling of benefits, the difference is the tax will be deducted in real time and not via an adjustment to your tax code following the P11D reporting method.

 

  • Salary sacrifice lease cars
  • Company lease cars
  • Salary sacrifice tech schemes, including Home Electronics and Liaison Tech
  • Salary sacrifice Hays Holiday scheme
  • Salary sacrifice Boiler scheme
  • Salary sacrifice Swyft Furniture scheme
  • Salary sacrifice bike schemes that do not meet the cycle to work criteria
  • Expense payments exceeding HMRC approved Mileage Allowance Payments (MAPs)