From April 2027, significant changes are coming to the way employers report benefits in kind (BiKs). Under new rules, it will become mandatory for most benefits provided to employees to be processed through payroll in real time.

This represents a major shift from the current system and will require employers to review and update their payroll processes well in advance.

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What is changing

From April 2027, employers will be required to include most taxable benefits in kind in their payroll. This means the tax due on these benefits will be collected through PAYE as part of employees’ regular pay, rather than being reported after the end of the tax year on forms such as the P11D.

Two benefits are excluded from mandatory payrolling:

• Employer provided living accommodation
• Interest free and low interest (beneficial) loans

These two benefits can still be payrolled if the employer chooses to do so, but this will remain voluntary.

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All other taxable benefits will need to be reported through payroll on a real time basis.

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What this means for employers

Mandatory payrolling of benefits will increase the importance of accurate and timely payroll data. Employers will need to ensure their payroll systems can correctly calculate the taxable value of benefits and report them in real time.

This change is intended to simplify tax reporting for employees, but it does place additional responsibility on employers. Payroll teams will need to work closely with HR and finance functions to make sure benefits information is complete, up to date, and provided to payroll on time.

Employers should not underestimate the time and effort required to make payroll processes robust enough to handle these changes.

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Why early preparation matters

Although April 2027 may seem some way off, early preparation will be key to a smooth transition. Employers who leave planning too late may face increased costs, system issues, and potential errors that could affect employees’ pay and tax positions.

Preparing early allows time to:

• Review which benefits are provided and how they are currently reported
• Assess whether existing payroll software can handle payrolled benefits
• Update internal processes and controls
• Train staff involved in payroll and benefits administration
• Communicate changes clearly to employees

Taking these steps in advance can help minimise disruption and avoid unnecessary pressure as the mandatory start date approaches.

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How we can help

We support employers in reviewing payroll processes, preparing for legislative changes, and implementing compliant and efficient payroll solutions.

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For help with mandatory payrolling of benefits in kind, visit our Payroll Services page to see how we can support you, or get in touch with our team to discuss your requirements.