Processing Benefits in Kind for Tax and NI

The payroll calculation run performs additional processing for all employees with benefits using the relevant formulae.

The final Pay Value result for each benefit element feeds the Taxable Pay balance as well as NIable earnings balances as necessary. The PAYE and NI calculations process these balances during the same payroll run to derive the tax and NI deductions for all employees.

Hence, all employees with benefits subject to tax and NI deductions will pay the required PAYE and NI (if applicable) on these benefits. Benefits that attract employer Class1A NIC means the employer needs to pay over the additional NI contributions at the end of the year. This applies to all employers regardless of whether you report benefits through P11D or process through payroll.