If you're payrolling employee benefits, it's not just about getting the numbers right – it's also about making sure your employees understand what it all means for them.

HMRC expects employers to communicate certain details when benefits are being taxed through payroll, and there are key pieces of information your employees need to receive. Here's a simple guide to what you need to share and when.

1. Let Employees Know by 1st June

If you've decided to payroll benefits, you must inform your employees in writing by 1st June following the end of the tax year. This can be done via email, payslip, or a letter – just make sure they’re notified. It’s important they know what’s being taxed through payroll and what that means for their tax code and take-home pay.

2. Share Details of the Payrolled Benefits

Employees should know exactly what’s being payrolled. That means telling them:

• Which benefits are being included

• The value or cash equivalent of each one

• How much tax has been deducted via payroll

  
  

Being transparent helps prevent confusion and builds trust.

3. If OpRA is Involved, Mention That Too

If any benefits fall under Optional Remuneration Arrangements (OpRA), you’ll need to include the amount that’s been payrolled for those as well. This includes salary sacrifice schemes, which are common for things like car benefits and health schemes.

4. Don’t Forget the Non-Payrolled Benefits

Some benefits may still need to be reported separately – for example, employer-provided living accommodation or interest-free loans. Make sure to clearly outline which benefits haven’t been payrolled and why.

5. Explain Tax Code Adjustments

When benefits are payrolled, HMRC will adjust the employee’s tax code to remove the estimated value of those benefits. Let them know that instead of a year-end tax bill, they’ll be taxed in real-time through their regular pay. It’s helpful to explain that this process spreads the tax over the year, avoiding big surprises later on.

6. Provide a Year-End Summary

At the end of the tax year, you should give each employee a summary of the taxable benefits they received. This isn’t just a nice-to-have – it’s expected. This summary should list the benefits and their total taxable value, so employees can keep it for their records (or for their tax return, if they do one).

7. Brief New Starters

If someone joins your company mid-year, you’ll need to explain how payrolling works for them. Let them know:

• Their tax code might still include adjustments from their previous job

• The new benefits won’t be in the code – they’re being taxed through payroll instead

• Any underpaid tax from earlier in the year might still be collected via their current tax code

  
  

Being upfront about all this from the start helps manage expectations and avoids confusion later on.

Final Thoughts

Payrolling benefits can be a smoother, more efficient way to manage tax – but only if your employees understand how it works. This isn't just a compliance tick-box; it's part of good employer communication.

By taking the time to share clear, accurate information, you're helping your team understand their pay and benefits better – and making life easier for everyone involved.

Need Help Communicating This to Clients or Employees?

If you're an accountant supporting clients with payrolling benefits, or a business owner trying to keep up with HMRC expectations – we can help.

We support payroll teams with clear templates, employee communications, and compliance know-how so you don't have to start from scratch.

👋 Want a hand? Drop Austin a message on austin@yourpayrollmanager.co.uk for a virtual coffee.