News
Benefits in Kind (BIK) – Payrolling Changes
07 Jul 2026
From April 2027, most Benefits in Kind will need to be processed through payroll in real time, rather than reported annually via P11Ds. In practice, that means tax will be collected monthly through PAYE, and employers will pay Class 1A NICs in real time rather than in July following the tax year, as they do now. The traditional P11D process will largely disappear, and employers will need to calculate benefit values 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
- Modelling the cash-flow implications of paying Class 1A NICs throughout the year, rather than in one lump sum
- Communicating with employees about how their payslips will change and what it means for their tax codes
What employers need to explain to employees
This is the part that needs the most care, because most employees won’t know how their BIK tax currently works.
Right now, many employees are paying tax on their benefits in arrears, without realising it. From April 2027, that changes, they’ll pay tax on a benefit in the same year they receive it. Employees may also currently have a deduction built into their tax code to cover an estimated benefit; that deduction disappears from April 2027, because HMRC will automatically remove BIKs from tax codes ready for the start of mandatory payrolling on 6 April 2027. From that point, tax on BIKs is paid in real time, in the year the benefit is received.
There’s one wrinkle worth flagging early: employees who are still catching up on tax for a benefit from a previous year may find it looks like they’re being taxed twice from April 2027 onwards. They’re not, they’re paying real-time tax on this year’s benefit while also settling up on a previous year’s. Worth explaining that clearly before anyone gets an unexpected letter or a smaller payslip.
What can WR do to help?
If you’re an existing payroll client we’ll supply email templates for your staff and a data capture form for your benefits, then apply the BIK to your employees from April 2027. This is priced on a matrix based on the number of employees processed each pay cycle, plus a one-off set-up fee to cover updating our software and supporting you directly with any queries. (We’re not able to speak to your employees directly, but we’re very happy to help you reassure them.)
If you’re currently a P11D-only client we can transition you onto our bureau payroll software and report to HMRC on your behalf in real time, again with a set-up fee and matrix pricing based on employee numbers. Director-only payrolls with benefits will also move from annual to monthly reporting if they receive a BIK.
If this feels like one more thing on an already long list that’s exactly what our Business Development Team is there for. Get in touch and we can talk through bringing you onboard for an end-to-end payroll service, so this becomes one less thing to manage.
