As of 2027, benefits will no longer be something that is only an annual concern.
It will become necessary to payroll Benefits in Kind (BIK) as you would any other salary costs.
You will need to pay any tax or National Insurance Contributions monthly instead of in an annual lump sum.
This also means including BIK on payslips for employees to understand.
How can you prepare for the changes before they come into force?
Careful planning will make sure that this does not have a negative impact on your cashflow.
It might seem like you have plenty of time, but careful planning is essential.
We have compiled a handy guide to show you how you can take steps to stay compliant with the changes as they occur.
It may be necessary to redefine how your business handles benefits, so be sure to read the guide to find out how best to approach this.
For more information speak to your usual contact in the payroll team.
FAQs
Currently, benefits are documented in the annual P11D form, and their related National Insurance Contributions (NICs) are paid in one lump sum after each tax year.
The new system will see a monthly reporting of benefits as part of standard payroll.
Tax and NICs will be paid monthly as they are with salaries.
An annual summary of all payroll benefits will be issued on 1 June.
Voluntary registration is available now.
The mandatory start date is 6 April 2027.
More guidance will be released by the end of the year with details on the software released in December 2025.
You will need to re-register before 5 April 2027.
The voluntary payrolling of BIK has been around since 2016, so re-registering ensures all businesses are up to date.
It is important to put a monetary value on all benefits.
This allows for easier determination of tax and NICs.
As with other information pertaining to payroll, it is important to include BIK considerations on payslips.
This is alongside the annual statement issued on 1 June.
Being transparent with employees helps them understand the implications of the benefits they receive.
To an extent, you can expect some cash flow issues to come with the changes.
The change from an annual payment to a monthly one increases the burden on tax and NICs each month.
However, the payments should be more manageable as they are spread throughout the year rather than being gathered in one annual payment.
Although HMRC are understanding during the initial change, there will be penalties eventually.
Preparing ahead of time can ensure that you are ready for the changes when they happen.
Take the time now to familiarise yourself with the rules so that you can stay compliant when they become mandatory.
For a more detailed breakdown of the changes to payrolling Benefits in Kind, download our helpful guide.
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