Pre-Budget report: Consultation launched on benefits-in-kind tax

The government is to launch a consultation on how best to collect tax on benefits in kind and expenses through payroll in November, which would remove the need for a separate end-of-year process.

This will include a consultation on removing the £8,500 a year threshold at which most benefits in kind become taxable, which is aimed at making it simpler for employers when reporting benefits.

The government will also work closely with businesses to improve the guidance offered around tax and national insurance contributions (NICs), to help employers understand and meet their tax obligations.

Karen Thomson, head of policy and research at the Institute for Payroll Professionals (IPP), said: “The IPP has been lobbying for this for about four years. There will be operational considerations to take into account, and it won’t happen overnight [but] we’re really pleased that [the government] is at least consulting on it.”

She added that the move would have advantages for both employers and employees. “It will assist employees with debt. People will know what their net pay is rather than [receiving] an unexpected tax charge at the end of the year,” Thomson explained.