From April 2027, payrolling Benefits in Kind (BIK) will become mandatory for all businesses.

This change will significantly impact the way you report and pay tax on benefits provided to employees and it’s crucial to start preparing now to make the transition as smooth as possible.

What’s changing?

Historically employers have used P11D forms to report benefits given to employees, but under the new system, BIK will need to be included in monthly payroll calculations.

Tax and National Insurance Contributions (NICs) for these benefits will be paid regularly alongside salary payments.

This ongoing reporting process will eliminate the need for annual P11D filings, reducing administrative burden but requiring ongoing attention to detail.

Why should you prepare now?

The changes won’t take effect until April 2027, but there’s plenty of work to do before then. If you wait until the deadline, you could find yourself scrambling to adjust to the new system.

By voluntarily opting into payrolling BIK before it becomes mandatory, you can familiarise yourself with the process and avoid last-minute confusion.  This has to be done by 5 April 2026.

Key dates to remember

  • April 2027: Payrolling BIK becomes mandatory.
  • 1 June 2027: A summary of all payrolled benefits must be issued to employees.

It’s important to use the extra year to get everything in place, as full compliance will be expected from April 2027.

What steps should you take now?

Here are a few steps that you can take now to ensure your business is prepared for this change in the coming year:

  1. Register with HMRC: If you’ve already opted into payrolling BIK voluntarily, ensure your registration is up to date. Check the latest HMRC guidance to confirm compliance with new rules.
  2. Invest in software: Consider investing in software that can automate the reporting of payrolled BIK. Look for solutions that can integrate with HMRC’s system and generate Full Payment Submissions (FPS) to ensure accuracy.
  3. Communicate with employees: Rather than waiting for an annual roundup, start including BIK details on payslips every month. Transparency with employees will help them understand their benefits and the associated tax implications.
  4. Plan for cash flow: The shift from an annual to a monthly payment system for tax and NICs could impact your cash flow. Start planning now to manage the regular payments and avoid disruption.

Time to take action

The transition to mandatory payrolling BIK is a significant change, but with proper planning, it can be managed smoothly.

If you would like assistance updating your payroll processes as you make the move to payrolling BIK, please speak to our experience payroll team.