Prepare now for changes to reporting Benefits in Kind in 2027
20 February 2026 | posted in Payroll
Payrolling Benefits in Kind is becoming mandatory. From April 2027 all Benefits in Kind (BiK), like company cars or medical insurance, will have to be reported and taxed through the payroll rather than via Form P11D.
Under the new rules, the value of the benefit is added to the employees’ monthly pay and Income Tax is deducted in real time.
Getting prepared as early as possible will help to ensure a smooth transition to the new system. You can do this by voluntarily payrolling some or all of your BiK in 2026/27, but you will need to act now to register with HMRC before 5 April 2026.
How can employers prepare for mandatory payrolling BiK now?
1. Start payrolling some or all of your benefits on a voluntary basis in the 2026/27 financial year
To prepare for the changes, employers have the option to payroll some or all of their employee benefits on a voluntary basis from 6 April 2026, ahead of the mandatory rules.
Early adoption gives you the chance to test your payroll systems and educate employees in advance of the changes becoming mandatory, ensuring a seamless transition when the rules come into force in 2027.
In addition, HMRC specifically highlights a cash-flow overlap risk. In July 2027, many employers may still be paying Class 1A NIC for 2026/27 under the old process while also starting real-time Class 1A for 2027/28 benefits – effectively two Class 1A bills in one financial year.
However, HMRC also stresses that the voluntary payroll service will be very different to the mandatory payroll service.
If you are considering payrolling benefits early from 2026/27, you need to act now to register with HMRC before the start of the new tax year (so by 5 April 2026). It is not possible to voluntarily register to payroll benefits in kind mid-year.
How and when to register with HMRC for payrolling benefits in kind
To start payrolling benefits in kind ahead of the 2027 deadline, employers need to register with HMRC to use the payrolling benefits and expenses online service.
2. Make a list of all the benefits in kind that you offer to employees
Keep a record of everything you would currently report to HMRC via a P11D form. This will help you to determine which benefits will need to be payrolled. (You will not need to payroll employer-provided living accommodation or employment related loans.)
If you use an external agent to run your payroll, you will need to make sure you have supplied them with all the relevant information to be able to payroll benefits in kind. If Moore run your payroll, we will let you know what information we need from you and when.
3. Ensure your payroll software can handle real time reporting of BIKs and is compliant with HMRC’s requirements
If you’re unsure, contact your software provider or your usual Moore adviser for further advice.
4. Think about how you will manage employees who join or leave during the tax year and how you will report on benefits that change in value.
Any changes (e.g. an employee changing their company car or joining a salary sacrifice scheme) must be reported to HMRC as soon as you become aware of them.
Make sure your current payroll processes allow you to calculate payments to employees with variable pay periods.
How Moore can help
Our payroll specialists can take care of the entire payroll process from start to finish, including payrolling Benefits in Kind, making sure you are fully compliant with all regulations. If we already run your payroll, we can register you voluntarily with HMRC and make sure you’re meeting all the requirements for payrolling BiKs.
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