Is the P11D Dead Yet? HMRC’s April 2025 Update Leaves Businesses in Limbo

Summary: Despite years of pressure to abolish it, HMRC has confirmed in its 28 April 2025 ministerial statement that the P11D form will remain in use — at least for now. But is replacing it with payrolling truly in the best interest of UK businesses?

HMRC Confirms: P11Ds Will Survive — For Now

According to the ministerial statement issued on 28 April 2025 (view statement), HMRC will retain the P11D and P11D(b) forms temporarily for:

• Employment-related loans and accommodation

• Globally mobile employees under modified PAYE arrangements (Appendix 6 and 7A)

A technical note published the same day (read technical note) confirms that voluntary payrolling of accommodation and loan benefits will begin in April 2027, with mandatory payrolling to follow.

The P11D: Still Necessary, Yet Neglected

The P11D may still be in use, but it hasn't seen any meaningful improvement in years. HMRC’s failure to modernise the form — either in content or process — has led to continued inefficiencies in:

• Reporting benefits in kind

• Supporting accurate PAYE coding notices

• Aligning end-of-year reconciliation

Instead of improving the existing system, HMRC has focused on reducing its own administrative costs by promoting payrolling — but this may create greater burdens for employers.

Is Mandatory Payrolling the Right Move?

Mandatory payrolling is being positioned as a simplification, but in practice, it often shifts complexity onto employers. Businesses are expected to:

• Upgrade systems to handle real-time BiK processing

• Train staff to manage live updates across payroll cycles

• Ensure accuracy despite evolving benefit types and policies

An alternative approach could involve:

• Redesigning the P11D for digital efficiency

• Allowing payments on account for Class 1A NICs

• Leveraging AI to automate BiK submissions and accuracy checks

This would balance the needs of government administration with employer feasibility.

Appendix 6 Cases: A Weak Case for Retaining P11Ds

While HMRC intends to retain P11Ds for Appendix 6 and 7A arrangements, this may be unnecessary.

Under the terms of an Appendix 6 agreement, employers must:

• Include all cash remuneration and BiKs in employees’ Self Assessment tax returns

• Confirm Modified PAYE and tax equalisation within the Employment Pages of the return

If full reporting already occurs via Self Assessment, requiring a separate P11D form adds little value and introduces duplication. These may be the exact scenarios where a P11D is least needed.

Deadline Flexibility: A Missed Opportunity for Broader Reform

Employers currently have until 31 January following the end of the tax year to file P11Ds in Appendix 6 cases. The technical note suggests this may change, but without a clear timeline or framework.

Simply adjusting the submission deadline risks confusion. A full review of the Appendix 6 agreement and reporting obligations would better serve employers and employees alike.

What Employers Should Be Doing Now

In light of this update, employers should take the following steps:

• Audit BiK processes, especially for non-standard arrangements

• Check payroll system readiness for expanded payrolling from 2027

• Monitor updates from HMRC as guidance evolves

• Evaluate AI-powered tools for automating BiK compliance and reporting

Conclusion: Reform, Don’t Retire the P11D

While the P11D may be outdated, mandatory payrolling is not necessarily the better alternative. A revamped, digitally enabled P11D — supported by AI — could provide a more balanced solution that meets the needs of both HMRC and employers.

For globally mobile employees under Appendix 6, where full Self Assessment is already required, retaining the P11D seems redundant. Reforming the process — rather than replacing it — may be the smarter route forward.

Sources:

• Ministerial Statement: Written Statement – HCWS607 (28 April 2025)

• HMRC Technical Note on Mandatory Payrolling of BiKs (28 April 2025)