HMRC’s interim guidance on the payrolling of benefits and expenses was updated on 04 September 2026 and confirms the Class 1A National Insurance Contributions (NICs) treatment on benefits that are payrolled voluntarily but are not within the scope of Phase 1.
The phasing of the payrolling of expenses and benefits starts with Phase 1 in April 2027. At this time, the following benefits must be processed via the payroll for the collection of Income Tax (from the employee) and real-time collection and payment of Class 1A NICs (by the employer):
- Company cars and fuel;
- Company vans and fuel; and
- Private medical (health and dental etc)
However, it is possible to voluntarily payroll expenses and benefits that are not in Phase 1, for example, assets transferred and services supplied. Currently, Class 1A NICs are not calculated and payable in real-time on expenses and benefits that are voluntarily payrolled. On 04 September 2026 updated their interim guidance with the following statement:
Based on stakeholder feedback, for employers choosing to voluntarily payroll benefits that are not mandated during Phase 1, we can confirm that any associated Class 1A National Insurance contributions must also be payrolled in real time from 6 April 2027.
This is a significant statement for employers and software developer professionals.
For Bookkeepers
It was believed that only benefits in Phase 1 would be subject to the real-time calculation and collection of Class 1A NICs. This is a calculation of 15% of the taxable value that will be payable with the monthly PAYE remittance. However, HMRC’s announcement indicates that any benefit subject to Class 1A NICs will be subjected to real-time calculations and remittance if this is processed via the payroll rather than the P11D.
This moves the Class 1A calculation and payment liability from annual to one that must be considered every time the payroll is run and PAYE liabilities calculated, payable by the 19th / 22nd of the following calendar month.
In terms of cash flow, ICB speculates whether this announcement will serve as a disincentive to employers who want payroll expenses and benefits that are not mandated in Phase 1.