HMRC has announced that the introduction of mandatory payrolling for benefits in kind (BiKs) and taxable employment expenses will now be implemented from April 2027, rather than the previously planned April 2026 date.
This decision follows feedback from external stakeholders and aims to provide employers, payroll professionals, software providers and tax agents with additional time to prepare for this significant change.
The new timeline will mean that for most BiKs and expenses, Income Tax and Class 1A National Insurance contributions will need to be reported through Real Time Information (RTI) and paid in real time from April 2027. This delay offers businesses more opportunity to adapt their systems and processes to ensure compliance.
Whitley Stimpson Payroll Manager Tracy Gill said:
“This extension is welcome news for businesses of all sizes. The additional year will give organisations time to properly understand the new requirements and adapt their processes accordingly. For smaller businesses in particular, these regulatory changes can be complex to implement, and this extension provides crucial breathing space.”
The updated technical note published by HMRC provides operational information on how the new BiKs reporting system will work, including decisions made to account for less common circumstances requiring special consideration. Some of the key updates include:
- From April 2027, most benefits in kind will need to be reported via the Full Payment Submission (FPS), which is the same process employers currently use to report salary and other employee details.
- The number of data fields for reporting BiKs in RTI will increase to align with current P11D and P11D(b) forms.
- Payrolling of employer-provided loans and accommodation will remain voluntary from April 2027.
- HMRC will introduce a “light touch” penalty approach for the first year of implementation, with penalties for inaccuracies only charged in cases of deliberate non-compliance.
“Payroll is a highly specialised area requiring deep understanding of both payroll legislation and employment law,” Tracy explains. “These changes to BiK reporting will add another layer of complexity that businesses need to prepare for. Ensuring compliance will require attention to detail and staying up to date with the latest guidance as it’s released between now and 2027.”
During this transition period, employers can continue to voluntarily payroll most BiKs for Income Tax ahead of April 2026 but will need to register to do so prior to this date. The voluntary registration service will close after 5 April 2026 in preparation for the introduction of mandatory payrolling.
Significantly, outsourcing your payroll can help navigate these changing requirements with expert support.
“With these regulatory changes on the horizon, many businesses are reconsidering whether to manage payroll in-house or outsource to specialists,” Tracy says. “We go above and beyond what a lot of other providers do by providing a tailored service to each client – we have a personal relationship with them, with guidance that aligns with their individual needs.”
For businesses already using voluntary payrolling, reviewing current processes in light of the forthcoming changes will be essential. For those yet to adopt payrolling of BiKs, the extension presents a valuable opportunity to understand the requirements and consider whether specialist support would be beneficial.
“Outsourcing your payroll is a sensible option designed to help you get on with running and developing your business effectively without worrying about its administration. As regulatory requirements continue to evolve, having dedicated experts handling these complexities becomes increasingly valuable,” concludes Tracy.
For further information please contact Tracy Gill: tracyg@whitleystimpson.co.uk or 01295 270200.