Car & Fuel Benefits

Car and Fuel Benefit in Payroll

From the 2016/2017 tax year, employers were able to account for the tax on the benefits in kind (BiKs) they provide to employees via PAYE instead of sending a P11D after the end of the tax year. The value of the benefit is added to the employee’s taxable pay for each pay period and reported via FPS.

You can payroll all benefits in kind apart from:

  • Vouchers and credit tokens
  • Employer provided living accommodation
  • Interest free and low interest (beneficial) loans

This means you can also choose to payroll company car BiKs instead of submitting the P46(Car) form. The benefits are calculated in the same way as previously, but the cash equivalent is divided into an equal amount for each pay period, with any residual amount going through the final pay period for the year.

In your payroll software, you are able to add cars, allocate them to employees, calculate the cash equivalents of the car and fuel benefit for the year and process a prorated amount through payroll.

To use the new benefit fields, the company must be registered with HMRC to payroll benefits. You can do this using your HMRC online account.

Click here for HMRC Overview: Payrolling employees taxable benefits and expenses

Click here for HMRC guidance: Payrolling: tax employees’ benefits and expenses through your payroll 

Register with HMRC for benefits and expenses online service – you will need your HMRC User ID and Password.

How to process car and fuel benefits in your payroll software

Please refer to the software specific guides below for your payroll product:

Using Payroll to process other types of benefits in kind

You can use notional payments to payroll benefit in kind for employees. Please refer to the guides below for product specific instructions.

PLEASE NOTE: Notional payment functionality is not available for PAYE-Master or GP payroll users.