Car and fuel benefits in payroll

Instead of sending a P11D at the end of the tax year, you can now account for any tax on benefits in kind (BiKs) you provide to employees via PAYE. You add the value of the benefit to the employee’s taxable pay for each pay period and report this via an FPS. You can payroll all BIKS apart from:

  • Employer provided living accommodation.

  • Interest-free and low interest (beneficial) loans.

You must still report these excluded BIKS on a P11D, even if you are pay-rolling other BIKs for the same employee(s).

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 they were 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 can 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 car benefit fields, you must register your company with HMRC. You can do this using your HMRC online account.

There are three stages to managing company cars in the payroll software:

  1. Add a company car

  2. Allocate a car to an employee

  3. Processing car and fuel benefit through payroll

You can see all car options available in IRIS Earnie IQ by selecting Company > Configure Company Car Details > Company Cars.