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Preparing for the new tax landscape: ITSA quarterly and P11D changes

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With significant changes on the horizon for tax reporting, businesses and self-employed individuals must prepare for new mandatory quarterly submissions under Making Tax Digital for Income Tax Self Assessment (MTD ITSA) and updates to P11D reporting.

These shifts aim to modernise the UK tax system, but they bring new obligations that require careful planning. At Crunch, we understand that navigating these updates can feel overwhelming, so we’re breaking down what’s changing, what it means for you, and how to prepare.

Understanding P11Ds and the Transition to Payroll Integration

P11D's are used to report Benefits in Kind (BiK) provided to employees or directors that aren’t included in their salary or wages. These can include perks like private medical insurance, company cars, or interest-free loans. Traditionally, employers have submitted P11Ds annually, accompanied by the P11D(b) form to report Class 1A National Insurance contributions.

From April 2026, changes to P11D reporting will fully integrate Benefits in Kind into payroll processes. This means that instead of submitting annual P11D forms, businesses will report BiK in real time as part of regular payroll filings. For example, if an employee receives private medical insurance worth £600 per year, £50 will be added to their taxable income each month and reflected in their payslip. At the end of the tax year, employees will receive a summary document, similar to a P60, detailing all benefits received.

While this integration simplifies end-of-year reporting, it requires employers to update their payroll systems and processes to ensure compliance. Registration with HMRC to payroll benefits must be completed before the start of the tax year (by 5 April). It is crucial to meet this deadline, as late registrations cannot be applied retrospectively within the same tax year.

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ITSA quarterly submissions: What you need to know

Under MTD ITSA, quarterly submissions will become mandatory for self-employed individuals and landlords earning over £50,000 annually from April 2026. Those earning over £30,000 will follow in April 2027. These updates align with the government’s wider initiative to digitise tax reporting and reduce the tax gap caused by errors or poor record-keeping.

Quarterly submissions will include unadjusted summaries of income and expenses, submitted through HMRC-compatible software. Taxpayers will also complete an annual End of Period Statement (EOPS) to confirm their final figures and make any necessary tax adjustments. While quarterly submissions aim to simplify the process, they also demand greater organisation and adherence to deadlines.

Preparing for these changes

Transitioning to payroll-integrated P11D reporting and ITSA quarterly submissions requires proactive steps. Here’s how you can prepare:

1. Review your record-keeping practices

With digital record-keeping becoming mandatory, now is the time to assess whether your current systems meet HMRC’s requirements. Consider investing in compatible software that automates data collection and integrates seamlessly with your existing processes.

2. Understand registration requirements

For payrolling BiK, ensure timely registration with HMRC before 5 April each year. For ITSA, eligible taxpayers must sign up for the scheme and familiarise themselves with the submission process.

3. Communicate with employees and clients

For businesses managing payroll, informing employees about payrolled benefits and how these impact their tax codes is essential. Employees should receive written notification by 1 June after the tax year ends, detailing their benefits, the tax paid, and any adjustments made.

For self-employed individuals and landlords, communicating with an accountant or tax adviser can help clarify the new obligations and ensure compliance.

4. Test your systems

HMRC’s testing phases for MTD ITSA offer an opportunity to trial the new processes without facing penalties. Engaging in these phases allows you to refine your reporting workflows and address potential issues ahead of mandatory implementation.

5. Plan for increased frequency

Quarterly ITSA reporting requires more frequent interaction with your financial records. Businesses and taxpayers must allocate time and resources to meet these deadlines and avoid penalties for late submissions.

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The role of technology

Digital transformation lies at the heart of these changes. HMRC’s push for Making Tax Digital reflects a broader trend of integrating technology into financial processes to improve accuracy and efficiency. Using HMRC-approved software not only simplifies compliance but also provides additional benefits, such as real-time insights into your financial health.

For businesses already using digital tools for VAT under MTD, the transition to ITSA quarterly updates will likely feel more manageable. Many software providers now offer solutions designed to handle both VAT and ITSA, streamlining the process further.

Crunch’s support for your transition

At Crunch, we’re here to make these changes as seamless as possible. Whether you’re navigating the integration of P11D into payroll or preparing for MTD ITSA, our tools and expertise can help you stay compliant while simplifying your workload. Our payroll services are equipped to handle payrolled benefits, and our accounting software ensures your digital records are ready for quarterly updates.

Additionally, our team of experts can guide you through the registration process, help you understand your obligations, and provide ongoing support to ensure you’re fully prepared for the new tax landscape.

Looking ahead

The move towards payroll-integrated P11D reporting and quarterly ITSA submissions marks a significant shift in how businesses and taxpayers interact with HMRC. While the changes may initially feel daunting, they also present an opportunity to modernise your financial practices, gain better visibility into your tax obligations, and reduce the risk of costly errors.

By acting now, you can ensure a smooth transition and position yourself for success under the new system. Whether it’s adopting compatible software, improving your record-keeping, or engaging with HMRC’s testing phases, the steps you take today will help you meet tomorrow’s challenges with confidence.

For more information on how Crunch can support your transition to payroll-integrated P11D reporting and MTD ITSA, visit our Knowledge Hub or get in touch with our team. Together, we’ll navigate these changes and keep your finances on track.

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Updated on
January 24, 2025

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