Benefits in Kind reporting is changing… again
The Government has revised its plans for mandatory payrolling of Benefits in Kind (BiK), introducing a phased approach that splits the rollout across two years.
The timetable has already shifted once, with the original April 2026 start date having been pushed back, so the new changes provide additional confusion for businesses.
Employers now need to understand which benefits are affected and when, to ensure they are ready in time.
What is changing and when?
Currently, employers report taxable benefits to HMRC after the end of the tax year using form P11D and pay Class 1A National Insurance Contributions (NICs) via a P11D(b) submission.
Under the new system, benefits will instead be reported and taxed through payroll in real time, with Class 1A NICs also paid throughout the year rather than as a lump sum after year-end.
However, the Government has now confirmed that not all benefits will move across at the same time.
From 6 April 2027, mandatory payrolling will apply only to company cars, vans, fuel benefits and privately arranged medical or dental insurance.
Most other taxable benefits will not become mandatory until 6 April 2028.
As these changes will require employers to report most Benefits in Kind through payroll, seeking professional payroll management services can help ensure your business remains compliant and avoids unnecessary reporting errors.
What about loans, accommodation and PSAs?
Benefits relating to employee loans and employer-provided accommodation sit outside the mandatory scope for now, though employers can choose to payroll these voluntarily. HMRC has indicated that these will be brought into the mandatory system in future.
Benefits reported under a PAYE Settlement Agreement (PSA) are unaffected by the changes.
Where a PSA is in place, the employer continues to pay Income Tax on behalf of employees and Class 1B NICs on the total value as before.
What about employers already payrolling voluntarily?
Since April 2016, it has been possible to payroll benefits on a voluntary basis. Employers already doing this will find the transition more straightforward, but there is still one change to be aware of.
Currently, voluntary payrolling collects Income Tax through PAYE, but Class 1A NICs are still settled after the year-end alongside a P11D(b).
From April 2027, Class 1A NICs on payrolled benefits will also move into real-time reporting, and the P11D(b) will no longer be required for those benefits.
What do employers need to do now?
The phased approach gives employers some additional runway, but those with company cars, vans, fuel or medical benefits need to be ready by April 2027.
Payroll software should be checked now to confirm it can support the new reporting requirements.
Employees receiving benefits through payroll for the first time should be informed of the change. In particular, they should be advised to check their PAYE code to ensure any existing adjustments are removed, to avoid income tax being collected twice on the same benefit.
Because these changes affect both payroll reporting and tax compliance, obtaining accounting and taxation advice can help businesses prepare for the transition.
The impact on net monthly pay should also be communicated clearly to staff well in advance of any changes.
If you would like help preparing for the changes to Benefits in Kind reporting, please get in touch with our team.
