Settling your 2025/26 PSA - Landlords Financial | Landlords Bookkeeping Accountants
If you have a PAYE Settlement Agreement (PSA) in place for 2025/26, you will need to pay the tax and Class 1B National Insurance due under the agreement by 22 October 2026 if you make your payment electronically. However, if you pay by cheque, your cheque must reach HMRC no later than 19 October 2026.
Before you can make the payment, you will need to work out what you owe and tell HMRC. If you have not already done this, you should do this without delay. This can be done online using form PSA1 (see www.gov.uk/guidance/tell-hmrc-the-value-of-items-in-your-paye-settlement-agreement).
As tax paid on an employee’s behalf is itself a taxable benefit, the tax on the benefits included in the PSA must be grossed up. To work out the tax due, you will need to know the marginal rate of tax for employees receiving the benefit and the value of the benefits provided to employees in each tax band.
Example
A Ltd settles the tax due on the annual Christmas gala dinner by means of a PSA. The dinner cost £250 per head and was attended by 20 employees paying tax at the basic rate and by eight employees paying tax at the higher rate.
The grossed-up tax is calculated as follows:
Value of benefits provided to basic rate taxpayers @ 20% (£250 x 20) @ 20% £1,000
Grossed up tax
£1,000 x 100/80 £1,250
Value of benefits provided to higher rate taxpayers
@ 40%
(£250 x 8) @ 40% £800
Grossed up tax
£800 x 100/60 £1,333.33
Tax due under the PSA £2,583.33
Class 1B National Insurance is payable on the taxable value of the benefits and on the tax due under the PSA. For 2025/26, the Class 1B rate is 15%.
In this example, the Class 1B liability is £1,437.50 (15% ((£250 x 28) + £2,583.33)).
Making the payment
Once the calculation has been submitted, you will receive a payment reference and a payslip. Payment can be made online at www.gov.uk/pay-psa by approving a payment through your bank account, by debit card or by corporate credit card. You will need the payment reference.
Payment can also be made through online or telephone banking or by direct debit.
Settling your 2025/26 PSA - Landlords Financial | Landlords Bookkeeping Accountants
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