Voluntary payrolling of benefits to be simplified

Budget 2015: The government is to introduce a statutory framework for voluntary payrolling and exempt certain reimbursed workplace expenses.

In the Budget 2015, Chancellor George Osborne announced that from April 2016, the government will also remove the £8,500 threshold below which workers do not pay income tax on certain employee benefits in kind. It will introduce new exemptions for carers and ministers of religion.

This new exemption for reimbursed expenses will not be available in conjunction with any salary sacrifice arrangements, and is aimed at simplifying the administration process for workplace benefits.

John Harding, employment tax partner at PricewaterhouseCoopers (PWC), said: “This is something employers have been requesting for some time and will mean that employees should now pay the correct amount of income tax on their benefits throughout the year.  

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“While it remains to be seen which benefits are to be included and how quickly payroll systems will be adapted for these changes, the reduction in the administration burden could be as high as £20 million a year for UK employers.

“The payrolling of benefits will also help support the Chancellor with the plans he announced to introduce digital tax accounts and remove the need for annual tax returns, so that employees can manage their tax affairs online and in real time.”