HM Revenue & Customs (HMRC) has announced it will delay the mandatory payrolling of benefits-in-kind (BIKs) and taxable employment expenses until April 2027 (click here to find out more).
The mandate had previously been due to come into force from April 2026 but it has been pushed back to allow employers, their agents and software providers more time to prepare.
The stance on registration has also changed. Currently, employers must register with HMRC before the start of a tax year if they wish to payroll benefits. However, from April 2027 there will no longer be a requirement to register as it will be automatic unless the employer is choosing to payroll beneficial loans or employer-provided accommodation.
The current process
It continues to be at the employer’s discretion whether to submit P11D forms to report employee BIKs or to register to payroll benefits. This will continue to be the case for the tax year ended 5 April 2027.
With the P11D method, the employee pays income tax either through their own Self-Assessment tax return or via an adjustment in the employee’s PAYE tax code.
If payrolled, the employee pays the income tax due on the benefit in monthly instalments from their salary under PAYE. The BIKs are processed as part of payroll Real Time Information (RTI) submissions. Employers are required to register to payroll benefits before 6 April 2026 if they wish to payroll for the tax year ended 5 April 2027.
From 6 April 2027
Reporting and paying income tax on BIKs through payroll will become mandatory, removing the requirement to submit P11D forms. However, interest-free or low interest (beneficial) loans and employer-provided accommodation can still be reported via P11D forms if the employer wishes to do so.
Employers will no longer need to register to payroll BIKs from April 2027 and it will become automatic. Registration will still be required if volunteering to payroll beneficial loans or accommodation. Registration for these two types of benefits is forecast to open from November 2026.
If benefits change during the tax year, HMRC expects adjustments to be made in real time via the payroll. However, there will be a post year-end process whereby final adjustments can be made for any amounts that were not known during the tax year and could not be fully quantified in real time.
Next steps
Payrolling of benefits is processed alongside the employee’s pay and so employers will need to consider the impact this may have on how they operate their payroll. It will also be important to communicate to all employees the changes before they occur.
A timeline has been included in the technical guidance which confirms updated legislation and further detailed guidance is expected to be published around July 2026.
For more information around the implementation of the mandatory payrolling of BIKs, or support and advice for planning ahead of these changes, including remuneration package implications, please contact Claire Proctor (claire.proctor@ct.me) or Fraser McCallum (fraser.mccallum@ct.me).
