How employers can prepare for the 2026 P11D changes

As the deadline approaches, an early look at the new requirements for managing benefits in kind is key.

The upcoming changes to P11D reporting, due to take effect in April 2026, will create a standardised and more efficient way of managing benefit in kind (BIK) reporting.

As a result, the move to real-time reporting across all benefits will simplify the current manual process and reduce delays.

For employers running salary sacrifice car schemes, this is particularly important.

Right now, there's some confusion about whether to use the manual P46/P11D process to notify HMRC about car benefits or to use payrolling the benefit (also known as tax at source).

This confusion can lead to inconsistent tax deductions and delayed payments, frustrating both employers and employees.

The P46 process also often causes delays in setting up the benefit in kind with HMRC, meaning tax isn’t deducted at the right time.

Sometimes, the responsibility falls on the employee to inform HMRC, which can lead to mistakes or incomplete reporting.

The new system should eliminate these issues, creating a much smoother experience for everyone involved.

Navigating challenges

While these changes will bring many benefits, they also come with some risks if employers don’t properly prepare.

A key concern is that employers might not fully understand the new requirements or leave their preparations too late.

One common misunderstanding could be around the need to complete annual P11D forms. Some employers might think that by payrolling the benefit, they no longer need to submit a P11D.

However, this isn’t the case.

Even with payrolling the benefit in place, employers must still produce and file an annual P11D(b) report with HMRC, detailing the benefit in kind provided and the taxes collected.

This report ensures HMRC has an accurate record of both the monthly deductions and any tax paid to them directly, which still requires reconciliation.

Not understanding this requirement could lead to penalties for late or incomplete reporting.

As the reporting will now be handled in real-time, employers may also face penalties if they submit the information late to HMRC.

It’s crucial for businesses to get the process right ahead of time to avoid any unexpected issues.

Starting preparations early

Although the changes don’t come into effect until April 2026, employers should start preparing well in advance to avoid any last-minute complications.

One of the first steps is to check with payroll providers and software suppliers to ensure they are ready for the new system.

As the deadline approaches, there may be an increased demand for changes, so starting early is key.

This will help avoid delays and ensure your payroll system can handle the new real-time reporting requirements.

For employers who offer salary sacrifice car schemes, this is especially important.

Setting an internal deadline of April 2025, a full year ahead of the official switchover, is a good idea to allow time to address any complexities and ensure the new system is fully up and running.

Getting this wrong could result in additional costs, increased workloads, and incorrect tax payments for employees.

Whether payroll is handled in-house or outsourced, it’s important that the teams managing this process are well-prepared and trained on the upcoming changes.

Any potential cost changes also need to be factored in, and conversations with payroll teams should begin as soon as possible to ensure a smooth transition.

Finally, when it comes to notifying your workforce, informing employees about the upcoming changes is not essential, however, it’s considered best practice to do so.

Avoiding any confusion

Letting them know what is happening, when the changes will take effect, and reassuring them that they don’t need to take any action will help avoid any confusion.

In particular, it’s helpful to clarify that employees don’t need to contact HMRC about their BIK.

Otherwise, they might mistakenly reach out to HMRC, which could cause additional issues.

A simple communication explaining that the employer will handle everything should help ensure a seamless transition for employees.

In summary, the 2026 P11D changes offer a great opportunity for employers to simplify their BIK reporting processes and reduce delays.

Starting early is key to avoiding issues further along the line.

While the deadline might seem far away, it’s worth taking steps now to make sure your organisation is fully prepared by the time April 2026 rolls around.