As we have previously reported, the mandatory payrolling of Benefits in Kind (BiKs) will now take effect from April 2027.
This follows the Government’s announcement that the changes would be deferred for a year, from the original April 2026 date.
Whilst motivated by a clear need for those involved (software vendors, employers, tax agents and payroll service providers) to be given more time to prepare, we would encourage employers not to use the delay as an excuse to put off action.
Under the new rules, the majority of BiKs – company cars, medical insurance and gym memberships, for example – must be processed via Pay As You Earn (PAYE), and the familiar P11D process will be phased out.
On paper this appears to simplify reporting but, in practice, it creates operational, system and process challenges that will be much easier to manage if dealt with proactively.
Payrolling BiKs: Should I wait until 2027 to make the transition?
In short, the deferral is a reprieve and not a reason to sit and wait; employers can voluntarily payroll most BiKs for Income Tax, for the 2026/27 year, by registering with HMRC to do so prior to 6 April 2026.
Employers who choose to embrace voluntary payrolling ahead of the mandation date will avoid unnecessary time pressure and likely ensure a better experience for themselves and their employees.
The following are just four good reasons why you might decide to register for voluntary payrolling in the coming months:
- Complexity – Integrating BiKs into your payroll isn’t an overnight switch. Payroll software, HR systems, and employee communications all require thoughtful and careful alignment. Early adoption gives you time to identify any problems and to iron these out without the pressure of mandatory compliance.
- Employee experience – Payrolling provides employees with real-time clarity on their tax liabilities, reducing confusion and year-end surprises, and giving them greater financial confidence.
- Reduced admin – With payrolling set to replace the usual P11D process in most instances, a more streamlined approach to benefits reporting awaits. Making the switch sooner rather than later can enable you to minimise last-minute administrative pressure, and embed a smoother process well before the deadline.
- HMRC support – HMRC already supports voluntary payrolling, so there’s nothing to stop you taking advantage before mandation. Use the time you have available to you wisely!
If you have not yet taken steps to prepare for the changes, and you are not already considering registering to payroll benefits ahead of April 2027, then we would strongly recommend that you seek advice.
The transition will be complex, and the consequences of getting it wrong could be costly. Partnering with an experienced payroll bureau can take the pressure off, ensure your systems and reporting are compliant from the outset, and give you confidence that your business, and your employees, are ready for change.
Start planning now, with expert support, and turn a compliance challenge into a strategic advantage. Contact our team of payroll professionals today, to find out how we can help you with payrolling Benefits in Kind.
