February 06, 2026
Article
As we approach the end of the 2025/26 tax year, it’s a good time for farming and rural businesses to review any benefits provided to employees and ensure everything is in place for P11D reporting. Below is an overview of the key areas to consider this year.
1. Living Accommodation – Still a Key Focus for Farms
Many agricultural workers live on site, and the job related accommodation exemption continues to be important. Employment contracts should clearly reflect any requirement to live in tied accommodation. Where directors or family members are involved, the rules are more restrictive and require additional care. If the business pays household costs, some items may still give rise to a taxable benefit.
2. Company Vehicles – Cars, Vans and Pickups
Car and Van Benefits
Cars are taxed based on list price and emissions, while vans continue to benefit from simpler, lower fixed charges. Commuting in a van is not treated as private use, which is often helpful for farm workers. Following recent case law HMRC has reviewed the definition of a van for the purposes of a benefit in kind. Many vehicles previously considered to be vans have now been recategorised as cars. In deciding whether or not a particular vehicle counts as a car for car benefits purposes, HMRC considers every mechanically propelled road vehicle to be a “car” unless it is:
1. a goods vehicle (a vehicle of a construction primarily suited for the conveyance of goods or burden of any description)
2. a motor cycle (as defined in Section 185 Road Traffic Act 1988)
3. an invalid carriage (also as defined in that Act)
4. a vehicle of a type not commonly used as a private vehicle and unsuitable to be so used
This means that any vehicle suited equally to carry goods or passengers is now classified as a car.
Pool Vehicles
Shared vehicles can qualify as pool vehicles if strict conditions are met. This can remove the benefit in kind charge entirely, but HMRC’s expectations are tight. If you think any of your vehicles might fall into this category, it’s worth reviewing the arrangements.
Double Cab Pickups – Major Change from April 2025
From April 2025, new double cab pickups will be treated as cars for benefit in kind purposes. Existing pickups benefit from transitional protection until April 2029 (or earlier sale/ lease end). This change is likely to increase the tax cost for many rural businesses, so planned purchases may need revisiting.
3. Mandatory Payrolling of Benefits – Now Delayed to April 2027
Mandatory payrolling will now begin from 6 April 2027, rather than 2026. Most benefits will then be taxed through payroll, removing the need for P11Ds, although accommodation and beneficial loans will still require reporting for a period. Final guidance is expected later this year.
4. What Agricultural Employers Should Review Now
- Vehicle use and classification, especially pickups purchased after April 2025 and vehicles classified as vans.
- Employment contracts for workers in tied accommodation
- Whether voluntary payrolling is worthwhile ahead of 2027
- Fuel use and any private mileage
- Any vehicles not currently reported that may now fall into charge
5. Director’s Loan Accounts – Interest Charges and Benefit in Kind Considerations
Where individuals borrow more than £10,000 from the company, interest should be charged on the loan. If this interest is paid to the company, it becomes taxable income for the company and is charged at the company’s marginal rate. To avoid a benefit in kind, the interest must be physically paid to the company by 6 July following the tax year.
Alternatively, the loan can remain interest free, but this will create a benefit in kind. In some cases, even after accounting for P11D reporting costs, taking the benefit in kind can be more tax efficient.
Professional advice should be sought to determine the most efficient approach in each case.