P11Ds Are Changing: Why Now Is the Time to Prepare for What’s Next
While the P11D reporting deadline may be finished for this year, now is a good time to start thinking about what’s coming next.
Although HMRC has delayed the move to mandatory payrolling of most Benefits in Kind (BIKs) to April 2027, it’s still very much on the not so distant horizon. And from our perspective, that’s actually good news, because it gives franchise businesses more time to prepare properly instead of rushing to make changes at the last minute.
So, rather than waiting until the changes become mandatory, now is the perfect time to understand what they’ll mean for your franchise.
A quick reminder – what is a Benefit in Kind?
A Benefit in Kind is a non-cash benefit provided to an employee or director in addition to their salary.
The most common examples include:
Company cars
Private medical insurance
Beneficial loans
Living accommodation, and
Certain other employee benefits
Until now, many of these benefits have been reported annually through the P11D process, with any tax adjustments being dealt with afterwards.
But in the future, the aim is for most BIKs to be taxed through payroll instead, meaning your employees will pay the tax as they receive the benefit rather than after the end of the tax year.
What does this mean for employers?
Although the reporting method is changing, your responsibilities as an employer don’t just disappear (sorry!).
In fact, payroll becomes even more important.
Instead of gathering information once a year for the P11D process, you’ll need to make sure the right information reaches your payroll provider at the right time throughout the year, and for many franchise businesses, that means reviewing internal processes as much as reviewing payroll itself.
Your employees may notice the difference
In honesty one of the biggest changes to handle may not be administrative – it could be personal.
Because BIK will be taxed through payroll, some employees may notice a change in their take-home pay. That doesn’t necessarily mean they’re paying more tax overall, but in many cases, it’s simply that the tax is being collected differently.
Your potential challenge arises if employees aren’t expecting that change in their monthly pay, which can obviously lead to questions. And, as we’ve seen with many payroll changes over the years, that sort of surprise doesn’t usually go down well – and understandably so.
The key here is good communication, which will be just as important as getting the payroll changes right, and could save a lot of confusion later.
Start preparing now
Although the new rules aren’t mandatory just yet, now is a great time to start asking a few simple questions:
Who in your franchise currently receives Benefits in Kind?
Will they all be affected by the changes?
What benefits do they receive?
How is that information currently recorded?
What information does your payroll provider need from you, and when?
These aren’t questions to leave until the implementation date is just around the corner.
The franchise businesses that tend to have the smoothest transitions are usually the ones that have already had these conversations long before they’re absolutely necessary.
So, having these conversations now means you’ll have time to make any changes gradually rather than trying to implement everything at once – a smooth transition is always what we’re aiming for.
Work closely with your payroll provider
One of the most useful things you can do now is speak to whoever manages your payroll.
Because every payroll system works slightly differently, it’s worth understanding what information your provider will need, how often they’ll need it, and what deadlines you’ll need to work towards.
The earlier those conversations happen, the easier the transition is likely to be.
You may find the changes are actually relatively straightforward or you might discover there are processes within your franchise that need adjusting first. Either way, it’s much better to find that out now than when the new rules become mandatory.
If Grant-Jones manages your payroll, we’ll guide you through the process and make sure you’re prepared well before the changes are enforced.
And if another provider looks after your payroll, we can still work alongside them to make sure everything joins up properly. After all, we’re all working towards the same goal of making the transition as straightforward as possible for you.
Don’t treat this as just another compliance change
Like many HMRC changes we’ve seen over recent years, this isn’t simply about completing another form. It’s about making sure your payroll processes, record keeping and communication all work together.
And one thing we’ve learned from years of helping franchise businesses through legislative changes like this is that the rules themselves are rarely the biggest challenge.
It’s usually the preparation – or more accurately, the lack of it!
Leaving everything until the last minute often creates unnecessary pressure for you as the employer, and for the people supporting you.
So, starting early gives you time to understand what’s changing, review your processes, speak to your payroll provider and communicate with your employees properly, which all makes for a much smoother transition.
We’re here to help you
Changes like these often seem a long way off – until suddenly they’re not.
At The Franchise Accounting Specialists, we can help you understand what the upcoming changes mean for your franchise business, identify which employees are affected, work alongside your payroll provider, and make sure you’re well prepared before mandatory payrolling becomes a reality.
If you’d like to chat through these changes in more detail, feel free to get in touch with our team. We can help you plan ahead, avoid unnecessary surprises, and make sure you’re ready for the future.
