Autumn Budget 24: Employment taxes

The end of the P11D?

Payrolling of benefits in kind (BIKs) is set to be mandatory from April 2026 for all benefits, excluding employment related loans and accommodation which remain voluntary – for the time being.

Employers will need to divide the cash equivalent of the BIKs they will be providing across the number of relevant pay periods for each employee. The resulting figure is then reported alongside earnings with income tax deducted on the payslip. If a change to the cash equivalent occurs in the year, the employer must revise the taxable amount to payroll for the remaining periods for that tax year.

The cash equivalent of some BIKs will be more difficult to determine during the tax year than others, for example, if invoice details of BIKs provided by third parties aren’t received until after the end of the relevant tax year. Whilst the employer must ensure that reported taxable values are as accurate as possible and make corrections throughout the year as soon as information is known, it may not be possible to be completely correct all the time. Therefore, an end of year process will be introduced to amend the taxable value of any BIKs, where necessary.

The P11D(b), which reports the company’s Class 1A National Insurance liability, may also be a form of the past. Reporting BIKs to HMRC via PAYE through Real Time Information will not just be for income tax but will also take into account class 1A NIC.

Cars, vans and combinations

The appropriate percentages (APs) used to calculate the cash equivalent of company cars have been announced for 2028/29 and 2029/30.

Electric cars: currently set to increase by 1% per year until hitting 5% for 2027/28. From this point the AP will increase by 2% pa to 7% in 2028/29 and 9% in 2029/30.

Hybrids (<50g/km): currently set to increase by 1% per year until 2027/28.  Currently, the rates are also dependant on the cars electric only mileage range.  For 2027/28, the APs for hybrid cars range from 5% (>130 miles electric range) to 17% (<30 miles electric range).  From this point, rates are set to increase to align more closely with non-electric vehicles, with APs for all hybrid cars regardless of electric only range increasing to 18% in 2028/29 and 19% in 2029/30. Whilst only a 1% increase for those driving hybrid cars with <30 miles electric range, for those driving hybrids with >130 miles electric range the increase would be a punishing 13%.

All other: will increase by 1% pa with a maximum cap of 38% for 2028/29 and 39% for 2029/30.

The van benefit charge is set to increase from 6 April 2025 in line with September 2024 CPI growth.

Double cab pick-up (DCPU) vehicles will be considered cars and not vans, regardless of payload, from 1 April 2025 for corporation tax and 6 April 2025 for income tax. Transitional arrangements do provide a reprieve for those already in possession of such vehicles. These will apply for employers that have purchased, leased, or ordered a DCPU before 6 April 2025. They will be able to use the previous treatment, until the earlier of disposal, lease expiry, or 5 April 2029.

What’s next?

If you would like to know more about the topics covered in this article, speak to our tax expert below.

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