The Government has confirmed that the introduction of mandatory payrolling for Benefits in Kind (BiKs) will now be phased in over two years, giving employers additional time to prepare for the changes.
Originally due to take effect from 6 April 2027, the reforms have been revised following feedback from businesses, payroll professionals and industry bodies.
What Is Changing?
The new rules will replace the current P11D reporting process for most employee benefits. Instead of reporting taxable benefits at the end of the tax year, employers will be required to process them through payroll in real time.
This means that Income Tax and Class 1A National Insurance Contributions (NICs) on most Benefits in Kind will be calculated and reported through the payroll system, making the process more streamlined and reducing the need for annual P11D submissions.
The Phased Introduction
Phase 1 – From 6 April 2027
Mandatory payrolling will apply to:
- Company cars
- Company car fuel
- Vans
- Van fuel
- Employer-provided medical benefits
Phase 2 – From 6 April 2028
Most other Benefits in Kind will also become subject to mandatory payrolling.
However, beneficial loans and living accommodation will remain outside the mandatory regime for the time being, with voluntary payrolling continuing to be available for these benefits.
What Should Employers Do Now?
Although the changes are still some time away, employers should begin reviewing their payroll processes and employee benefits to ensure they are ready for the transition.
Further guidance from HMRC is expected by July 2026, which should provide more detail on how the new system will operate in practice.
Need Advice?
If you’re unsure how these changes could affect your business, our experienced team is here to help. We can guide you through the new requirements, review your current payroll processes, and ensure you’re fully prepared for the move to mandatory payrolling.
Get in touch with our London accountancy team today to discuss how we can support your business.
e: office@londonaccountants.co t: 0203 137 9791
Kind Regards,
The Team at London Accountants
