Upcoming P11D and MTD Changes

We want to keep you informed about upcoming changes to P11D submissions and Making Tax Digital (MTD) that may impact how you report and file your tax information. These changes are designed to streamline processes but may require adjustments in how you manage payroll and tax compliance.

P11D Changes – Mandatory Payrolling of Benefits from April 2026
 
From 6 April 2026, the payrolling of taxable benefits will become mandatory, meaning benefits and expenses will be reported in real-time alongside salaries, rather than annually via P11D forms. Please note: 

• Certain benefits, like company cars and healthcare, can be reported monthly, making the transition straightforward.
• Other benefits, where the value isn’t known in advance (e.g., third-party gifts), will still require an end-of-year adjustment.

For the 2026/27 tax year, employee-related loans and accommodation can still be reported via P11Ds, but as HMRC moves toward full digitisation, these may also become mandatory for payrolling in the future.
 
Additionally, the official rate of interest is no longer fixed and could change quarterly. This means some employers may find it easier to continue using P11Ds for now.
 
Important Consideration for Employees

Currently, employees pay tax on P11D benefits through their tax code, meaning the deduction happens the year after the benefit is received. With the move to real-time taxation, employees will effectively pay tax on benefits twice in the first year of payrolling – once via their existing tax code and again through payroll. This could lead to higher tax deductions for some employees in the first year of the transition, so clear communication with affected employees will be essential.

Making Tax Digital (MTD) – Next Steps & Expansion
 
From April 2026, self-employed individuals and landlords with income over £50,000 will be required to comply with Making Tax Digital for Income Tax Self Assessment (MTD ITSA). This will involve: 

• Keeping digital records of income and expenses.
• Filing quarterly updates with HMRC through MTD-compatible software.
• Submitting an end-of-year declaration instead of a traditional Self-Assessment return.

 
From April 2027, the threshold will reduce to £30,000, bringing more individuals into the MTD system.

Those who are affected will receive direct communications from HMRC.. 

Next Steps
 
These changes represent a significant shift in how tax reporting and payroll processing will work. If you have any questions or would like to discuss how these changes will impact your business, please get in touch.