Margaret Egan

Set to take effect in April 2026, the new real-time payroll reporting rules will require businesses to report income tax and Class 1A National Insurance Contributions (NICs) for most benefits-in-kind to HMRC in real-time.

The change will mean that many taxpayers will no longer have their income tax collected in arrears with end of year tax returns set to be phased out.

From 6 April this year, businesses will start to pay 15% NIC on benefits-in-kind, such as company cars, health insurance and gym memberships. Then, a year later, they will be required to report any benefits in real-time while also paying the higher 15% NIC rate.

Margaret Egan, head of Payroll at Wbg, said: “Businesses should view this as an opportunity to modernize their payroll systems, improve compliance, and streamline operations for future growth.”

“Many employees may be unaware of how these changes will impact their take-home pay and budgeting. They would be advised to provide clear communication to help them understand the shift to real-time tax collection and its implications. 

“The immediate transition may be challenging, although real-time reporting could reduce errors and administrative burdens in the long run by eliminating the need for end-of-year tax reconciliations.

“Unsurprisingly, more businesses are looking to outsource their payroll function as long gone are the days of just pressing buttons!”