The government has announced a revised timeline for the introduction of mandatory payrolling of Benefits in Kind (BiKs) and taxable employment expenses. Originally due to take effect in April 2026, the change has now been postponed to April 2027, giving employers, more time to prepare for the shift to real-time reporting.
The update forms part of HMRC’s wider digital transformation efforts and aims to streamline how employee benefits are reported and taxed, helping reduce administrative burden and improve the accuracy of tax codes.
From April 2027, the process for reporting BiKs and taxable expenses will move to the Full Payment Submission (FPS) which is the same digital method currently used to report salaries and other employment data to HMRC. This means benefits will be reported in real-time alongside regular payroll information.
While most benefits will fall under this new system automatically, employment-related loans and accommodation will require voluntary payrolling from April 2027, and employers will still need to register if they wish to report these through payroll.
From April 2027, HMRC will automatically remove BiKs from employees’ tax codes as part of the transition to mandatory payrolling. This will simplify the process for employers, who will no longer need to register to payroll most benefits in kind. However, as mentioned, loans and accommodation will still require registration, at least in the initial stages.
Yes, but only temporarily. HMRC has confirmed that the P11D and P11D(b) forms will still be required for employment-related loans and accommodation while voluntary payrolling is in place. A timeline for when these benefits will also become mandatory under the new system is expected in due course.
However, some less common benefits such as tax award schemes and third-party benefits are currently not covered by the new payrolling requirements.
With these changes now set for April 2027, businesses have a valuable window to prepare. Reviewing current BiK processes, speaking with payroll providers, and planning internal training will help smooth the transition and reduce the risk of reporting errors.
If you’d like to speak to one of our tax or payroll specialists about how this affects your business, get in touch at payroll@hall-morice.co.uk
