HMRC has pushed back the requirement to payroll Benefits in Kind (BiK) until April 2027, offering employers more breathing room to prepare for this significant change. Originally scheduled for April 2026, this new timeline provides an additional year for businesses, payroll professionals, and software providers to get ready.
However, whilst the delay may ease immediate pressure, it’s not a reason to put preparation on hold. The change, when it arrives, will significantly alter how businesses report and manage employee benefits, and the administrative workload will increase as a result.
What’s Changing?
Currently, many employers report BiK through annual P11D forms. Under the new mandatory system coming in April 2027, these benefits will be taxed through payroll in real-time, with Income Tax and National Insurance Contributions (NICs) on benefits collected monthly rather than annually.
This fundamental shift means employers must adjust their systems to track and process BiK on a rolling basis throughout the tax year.
Key Changes at a Glance
- Real-time reporting through Full Payment Submission (FPS) instead of annual P11D forms
- Monthly tax collection rather than end-of-year adjustments
- Automatic registration – no need to register for mandatory payrolling
- Expanded RTI fields to capture detailed BiK information
Even with the switch to monthly payroll reporting, businesses will still need to provide employees with an annual BiK summary by 1st June each year.
What Should Businesses Be Doing Now?
Even with the 2027 deadline still over a year away, there are practical steps you can take now to get ahead of the change:
1. Document Your Current Benefits
Audit your existing benefits and identify which ones will need processing through payroll.
2. Consider Early Adoption
Though still voluntary for now, early adoption of BiK payrolling gives you valuable time to test and refine your internal processes, reducing the risk of errors once the rules become mandatory.
3. Start Monthly Monitoring
If you’re not ready to implement full payrolling yet, start monitoring benefits on a monthly basis. This will ease the eventual transition and simplify your final P11D process for the 2026-27 tax year.
4. Re-registration Requirements
For businesses already voluntarily payrolling BiK, it’s essential to understand that you’ll need to work within the new mandatory framework from April 2027. The current voluntary registration service will close after 5 April 2026.
5. Plan for System Updates
Engage with your payroll software provider about their readiness for the new requirements, budget for system upgrades and additional training needed ahead of the April 2027 deadline.
Special Considerations and Exceptions
Certain benefits will temporarily retain P11D reporting:
- Employment-related loans (voluntary payrolling available from April 2027)
- Accommodation benefits (voluntary payrolling available from April 2027)
- Specific scenarios like globally mobile employees under modified PAYE arrangements
The 50% Rule
Employers cannot deduct more than 50% of an employee’s cash pay in tax. Under mandatory payrolling, if BiK taxation would exceed this limit, amounts must be carried forward to future pay periods, with any remaining uncollected tax handled through HMRC’s end-of-year reconciliation process.
Timeline for Implementation
| Date | Key Milestone |
| Autumn 2025 | Draft legislation and guidance published |
| December 2025 | Initial software technical information released |
| July 2026 | Updated legislation and guidance published |
| November 2026 | Voluntary registration opens for loans/accommodation |
| April 2027 | Mandatory payrolling goes live |
To support smooth implementation, HMRC will not charge penalties for inaccuracies in 2027-28 unless there’s evidence of deliberate non-compliance. However, standard late filing and payment penalties will still apply.
If you need help preparing for mandatory BiK payrolling or have questions about how these changes will affect your business, contact us today. Our experienced team can provide tailored advice and support to ensure you’re ready for April 2027. Call 01905 777600 or email hello@ormerodrutter.co.uk.
Don’t wait until the deadline approaches – start your preparation now to make the transition as seamless as possible for your business and employees.
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