Mandatory payrolling of Benefits in Kind (BiK) is being introduced in stages, according to the Government’s latest update, with the rollout now spread across two separate years.
This is not the first change to the timetable. The original start date of April 2026 was already delayed once, so businesses now have another set of dates to get to grips with.
Employers need to work out which benefits apply to them and by when, so they are not caught out.
What is changing and when
At present, employers report taxable benefits to HMRC after the tax year ends, using form P11D, and settle Class 1A National Insurance Contributions through a separate P11D(b) submission.
Under the incoming system, benefits will be reported and taxed through payroll as they happen, with Class 1A NICs paid across the year instead of in one lump sum afterwards.
The Government has now confirmed that this will not happen for every benefit at once.
Mandatory payrolling begins on 6 April 2027, but initially covers only company cars, vans, fuel benefits and privately arranged medical or dental insurance.
The remaining taxable benefits will not become mandatory until 6 April 2028.
Loans, accommodation and PSAs
Employee loans and employer-provided accommodation are not part of the mandatory rules for now.
Employers can still choose to payroll these voluntarily if they wish, and HMRC has signalled that they will eventually be brought into the mandatory scheme.
Nothing changes for benefits covered by a PAYE Settlement Agreement (PSA). Employers with a PSA in place will continue paying Income Tax on employees’ behalf and Class 1B NICs on the total value, exactly as before.
Employers already payrolling voluntarily
Voluntary payrolling has been available since April 2016, so employers already using it will have an easier transition. There is still one thing to note though.
At the moment, voluntary payrolling handles Income Tax through PAYE, but Class 1A NICs are still calculated and paid after year-end via a P11D(b).
From April 2027, Class 1A NICs on payrolled benefits move to real-time reporting too, and the P11D(b) will no longer be needed for those particular benefits.
Next steps for employers
The staged rollout buys some extra time, but anyone offering company cars, vans, fuel or medical benefits needs to be ready for April 2027.
Now is a good time to check whether existing payroll software can handle the new reporting requirements.
Any staff member receiving benefits through payroll for the first time should be told what is changing.
They should also be prompted to check their PAYE code and remove any existing adjustments, so the same benefit does not get taxed twice.
It is worth explaining the effect on take-home pay to staff clearly and well ahead of the change taking effect.
If you would like help getting ready for the changes to Benefits in Kind reporting, please get in touch with our team.
