News
Benefits in Kind: Are You Ready for Real-Time Payrolling?
04 Sep 2026
From April 2027, most Benefits in Kind will need to be processed through payroll in real time, rather than reported annually via P11Ds. It’s one of the biggest changes to payroll compliance in years, and the sooner employers start preparing, the smoother the transition will be.
What’s changing?
Historically, the value of employee benefits has been reported to HMRC at the end of the tax year via a P11D form, often resulting in an estimated adjustment to employees’ tax codes for the following year. Under the new rules, tax will instead be collected monthly through PAYE, based on the cash equivalent value of each benefit. The traditional P11D process will largely disappear, employers will pay Class 1A NICs in real time rather than in July following the tax year, and benefit values will need to be calculated each pay period rather than once a year.
What should employers be doing now?
Now’s the time to start preparing. That means reviewing the benefits you provide to employees, checking your payroll systems can handle real-time BIK reporting, thinking through how data will flow between payroll, HR and finance, and modelling the cash-flow implications of paying Class 1A NICs throughout the year rather than in one lump sum. It’s also worth planning early communications with employees about how their payslips will change and what it means for their tax codes.
Explaining the change to your employees
This is the part that needs the most care, because most employees won’t know how their BIK tax currently works. Many are paying tax on their benefits in arrears without realising it. From April 2027, that changes: employees will pay tax on a benefit in the same year they receive it, and any deduction currently built into their tax code for an estimated benefit will disappear as HMRC removes BIKs from tax codes ready for 6 April 2027.
There’s one wrinkle worth flagging early. Employees still catching up on tax from a previous year may feel like they’re being taxed twice from April 2027. They’re not, they’ll be paying real-time tax on this year’s benefit while settling up on a previous year’s. It’s worth explaining this clearly before anyone gets an unexpected letter or a smaller payslip than they anticipated.
How WR Partners can help
We’ve put together a set of resources to help employers manage this transition:
An employee letter template, ready to put on your own letterhead, explaining the change clearly
A data capture form, available as a Word document for smaller teams or as a spreadsheet for larger companies with multiple employees across different benefit types
If you’d rather talk it through first, or want a quote for your whole payroll, including how Benefits in Kind fits in, get in touch with our Payroll Services Team on 08000 664 664.
Download the BiK resources now
You can download the employee letter template and data capture form by completing our short online form, we’ll send them straight to your inbox, along with details on how to get in touch if you’d like to talk it through with our payroll team.
