If your business offers employees perks such as company cars or private health insurance, you need to be aware of the upcoming changes to how these are taxed and reported.
From 6 April 2027, HMRC will require most Benefits in Kind (BiKs) to be reported through payroll in real time and replace the annual P11D reporting process.
This will become mandatory from the 2027-28 tax year, but employers have an opportunity to adopt the system early through voluntary payrolling.
With the registration deadline for this approaching, businesses need to understand what voluntary payrolling involves and how to prepare.
What is payrolling BiKs?
BiKs are non-cash perks that employees receive in addition to their salary.
Employers traditionally report these benefits annually using P11D and P11D(b) forms, with employees often seeing adjustments to their tax codes later to collect the tax owed.
Payrolling benefits changes this process and employers will need to include the taxable value of benefits directly through the payroll each pay period.
From April 2027, most BiKs will need to be reported through payroll via Real Time Information (RTI) submissions.
However, there will be a one-year deferral for beneficial loans and employer-provided accommodation.
What is voluntary payrolling for BiKs?
Before the mandatory rules come into force, HMRC is encouraging employees to trial the system by adopting voluntary payrolling for the 2026-27 tax year.
Employers will also have the choice to tax certain benefits through payroll.
Those who wish to register for voluntary payrolling with HMRC must do so before 5 April 2026.
If the deadline is missed, businesses will generally need to wait until the mandatory regime begins in April 2027.
Why should you consider voluntary payrolling BiKs?
Although voluntary payrolling is optional, many businesses see it as the most practical way to prepare for the upcoming changes.
Other advantages include:
- A smoother transition to the 2027 rules – Gives your payroll teams a full tax year to prepare your systems and processes before it becomes mandatory.
- Reduced year-end administration – Employers can reduce reliance on P11D reporting and year-end corrections.
- Improve employee transparency – Employees pay tax on benefits as they receive them, which reduces the risk of unexpected tax adjustments or backdated charges.
- Spot issues early – Testing the process allows you to resolve payroll or data issues well before they become mandatory.
How can your business prepare for voluntary payrolling BiKs?
Businesses considering voluntary payrolling need to act now to ensure their systems, processes and teams are ready for the new requirements.
Your business should:
- Review your benefits – Create a clear list of all benefits offered, how they are valued and where the data comes from.
- Register before the deadline – You must register with HMRC before 5 April 2026.
- Check payroll systems – Ensure your payroll software can handle payrolled benefits and calculate tax and Class 1A National Insurance correctly.
- Align payroll processes with benefits data – Make sure your benefits information can be collected and reported in time for each payroll submission.
- Communicate with employees – Explain the changes early so employees understand how benefits may appear on their payslips and affect take-home pay.
How can we support your voluntary payrolling?
These new rules will affect your BiKs reporting and will become an ongoing payroll responsibility.
Our expert team can advise you on your payroll and tax obligations and help your business prepare for voluntary payrolling for BiKs.
We can support your HMRC registration and assess whether your benefit calculations are accurate and compliant.
If you want to set up voluntary payrolling or are not sure if it is right for you, you must seek professional support now.
For further advice or information on payrolling BiKs, contact our team today.
