2025/26 Employment tax reporting

An employer is required to prepare a Form P11D and submit this to HMRC to report taxable benefits in kind provided to its employees in the tax year. A copy of the form must also be given to the employee.

In most cases, the benefit amount is chargeable to employer Class 1A National Insurance Contributions (NIC) and this is reported to HMRC on the employer declaration Form P11D(b).

However, there may be exceptions to this charge, typically when the employee is not within the scope of NICs, or when the benefit is chargeable to Class 1 NICs (reported in the payroll). 
The rate at which Class 1A NICs are charged for the tax year 2025/26 is 15%.

When to settle liabilities

The employee will be liable for any income tax due on the benefit, and this is usually settled through an adjustment to the employee’s tax code or via their self-assessment tax return.

Employers must settle the Class 1A NIC liability by the due date, which is 22 July 2026 following the end of the tax year for online payments and 19 July 2026 if paying through the post.

Employers can pay this online by bank transfer, direct debit, or with a credit card or corporate credit card. The liability may also be paid by cheque through the post or telephone banking.

Please see the following deadlines for the 2025/26 tax year.

Employer risks of non-compliance for P11Ds

HMRC can charge statutory and tax-geared penalties for the late submission of Forms P11D and P11D(b), or the filing of inaccurate forms. 

Failure to file forms and settle liabilities on time can lead to an increased risk of being selected for an employer check of records. It may also impact on the gross payment status for businesses within the Construction Industry Scheme.

Penalties for late filing

HMRC can charge penalties for the late filing of Forms P11D. The penalty is £100 per every 50 employees for each month or part month that a form remains outstanding.

Additionally, the First Tier Tribunal has the power to levy a further penalty of £300 per form and an additional £60 per day where the forms remain outstanding.

Penalties for submitting incorrect Form P11D and P11D(b)

HMRC can charge penalties for the filing of inaccurate Forms P11D and Form P11D(b).

The amount of penalty HMRC can charge for an incorrect Form P11D is up to £3,000 per form, although these are rarely levied in practice.

The penalty for the filing of an inaccurate Form P11D(b) is £100 per 50 forms. HMRC may also charge a tax-geared penalty based on the underpaid amount of Class 1A NIC.

Late payment of Class 1A NIC liability

HMRC charge penalties when the Class 1A NIC liability is not settled by the due date. The amount of penalty charged is 5% of the liability that is not settled within 30 days of the due date.

A further 5% may be charged on the outstanding liability after six months from the due date, and another 5% will be charged after 12 months.

Late payment interest

HMRC charges late payment interest on Class 1A NIC liabilities not settled by the due date.

If you would like assistance with preparing or checking your Forms P11D or PSA, please get in touch with your usual Crowe contact.

A PSA is an agreement between the employer and HMRC to report and pay tax on certain employee benefits and taxable expenses. These agreements are particularly helpful if the employer wants to ensure employees are not financially disadvantaged.

Usually, a PSA must be agreed with HMRC within 90 days after the end of the tax year which they wish to report. Once a PSA is agreed, this remains in place until either employer or HMRC cancels it.

New categories for PSAs should normally be agreed with HMRC prior to an expense or benefit being provided or within 90 days of the end of the tax year for benefits and expenses that are not included in the employee's tax code or should have been reported under PAYE.

Items that can be included on a PSA must be:

• minor that are low in value e.g. small gifts or a high street voucher
• irregular that are not paid at regular intervals e.g. relocation costs
• impracticable to allocate a cost to the employee e.g. a Christmas party which is not tax-exempt.

The employer is required to prepare a calculation of the benefits provided and the Income Tax and NIC liabilities and submit this to HMRC. A separate calculation is required for each employee population by devolved nation.

When to settle liabilities

Under a PSA, the employer settles the income tax arising on behalf of the employee on a grossed-up basis and employer Class 1B NICs.

The due dates for payment are 22 October 2026, if paying online, or 19 October 2026, if paying by post.

Please see the following timeline, including deadlines for the 2025/26 tax year.

Employer risks of non-compliance for PSAs

Penalties for late filing

There are no statutory penalties for the late filing of PSA calculations.

However, if the employer does not submit its PSA calculation to HMRC by the filing deadline, HMRC will issue a Regulation 110 Determination for the income tax and Class 1B NIC liabilities it estimates are due.

HMRC can also revoke the PSA agreement, typically when there are persistent compliance failures.

Penalties for late payment of PSA liabilities

HMRC may charge a late payment penalty of 5% calculated on the outstanding income tax and Class 1B NIC liability if this isn’t settled within 30 days of the due date.

HMRC may charge another 5% penalty if the liability is outstanding after six months from the due date, and a further 5% penalty if the liability is still outstanding for more than 12 months from the due date.

Late payment interest

HMRC charges late payment interest on any amounts of income tax and Class 1B NIC that are outstanding after the due date.

The government announced that payrolling benefits-in-kind will become mandatory starting April 2027 for all certain benefits apart from beneficial employer-provided loans and living accommodation.

From 6 April 2027, mandatory payrolling of BiKs will be phased in for:

• company cars
• car fuel
• vans
• van fuel
• employer-provided medical benefits.

Mandatory payrolling of most other BiKs will then be introduced from April 2028, excluding loans and accommodation.

This means that for the majority of employee benefits, P11Ds will no longer be required to be submitted to HMRC. Employers may want to give thought to how the changes may impact them and start planning for the changes.

From both an employer and employee perspective, the change to mandatory payrolling of benefits presents a potentially significant change to data, process and risk. Good planning and communication will be essential to success and avoiding non-compliance.

At Crowe, our employment tax specialists can guide you through the changes to ensure you have robust systems and policies in place that are underpinned by sound governance.