From April 2027, all UK employers will be required to payroll Benefits in Kind (BiKs) rather than reporting them through the traditional P11D process.
While this may feel a long way off, businesses should start preparing now so that their payroll remains compliant and employee benefits are taxed accordingly.
What changes will BiKs bring?
Payrolling BiKs means that taxable non-cash benefits, such as company cars and private medical insurance, will now be processed through payroll in real time rather than calculated and submitted annually.
These changes will reduce year-end admin for employers and provide a clear, up-to-date view of which employees are receiving which benefits.
What employers need to know
The move towards real-time reporting will affect how businesses offer staff benefits, particularly those with complex packages or with many employees receiving taxable benefits.
The main considerations include:
- Technology readiness – Payroll systems must process benefits alongside salaries accurately
- Data integration – HR and payroll teams must work together seamlessly
- Employee communication – Staff must be informed about the payroll changes and their impact
- Compliance – Incorrect calculations can create risks that are harder to correct in real time
How can employers prepare?
Employers must use the next year to assess which benefits are reported via P11D and whether their payroll system can handle real-time reporting.
Clear communication with your payroll providers can help confirm that you are ready to support payrolling BiKs and understand what additional data or system changes are required.
To reduce the risk of errors, employers may look to invest in technology and training to ensure staff who are responsible for payroll and benefits fully understand their roles and can process them accurately each month.
How to stay compliant with BiK?
Preparing for payrolling BiKs is crucial and salary sacrifice arrangements and consistent monthly calculations must be considered to avoid underpayment of tax.
With the right financial advice, you can streamline processes and ensure your payroll and benefit strategies remain compliant and efficient.
