The way that Benefits in Kind (BiK) is changing and if your business offers employees perks like company cars or private health insurance, you should be aware of the changes.
The P11D form will soon be a thing of the past and it is possible to get rid of it even sooner.
This is the final chance to volunteer for payrolling BiK for the upcoming tax year, so it is worth determining whether it is right for your business to take this chance.
What is changing with payrolling BiKs?
From April 2027, most BiKs will need to be reported through payroll via Real Time Information (RTI) submissions, with the main exceptions being accommodation and certain loans, which can still be reported on P11D if not payrolled.
However, it is possible to adopt voluntary payrolling for BiKs, but this must be set up before 5 April 2026.
BiKs are processed through the entire tax year, normally with the P11D form being the culmination of the tracking done across the year.
This has seen benefits only being reported annually, which then results in adjustments to tax codes later to collect the tax owed.
Instead, payrolling BiKs will allow employers to keep a closer eye on the way that benefits are being managed and processed by making them a routine part of payroll processing.
Why should businesses consider voluntary payrolling of BiKs?
As with most big regulatory changes, it generally makes sense to get a handle on how things are likely to change going forward.
By voluntarily payrolling BiKs this year, your team can get more comfortable with the shift in record-keeping ahead of the 2027 rules.
This can help liberate employers from the reliance on P11D reporting and year-end corrections and help them spot any potential issues early.
Employees also benefit from a greater sense of transparency, as tax is paid on benefits as they are received rather than adjusted later on.
How should businesses prepare for voluntary payrolling of BiKs?
While there is not much time before the deadline, it is still possible to get ready for voluntary payrolling of BiKs.
Employers should review their current handling of benefits to determine what is being offered and how their awarding is being tracked.
Payroll systems will need to be updated to handle the shift in administrative obligations that come with the regular reporting of BiKs.
Most importantly, businesses need to register before 5 April 2026.
It will not be possible to register after this date for the upcoming tax year, so missing the deadline will mean having to payroll BiKs when it becomes mandatory in 2027.
If you enjoy filing P11D forms, then this is your last year to do them before payrolling BiKs removes the need.
However, if you are already tired of dealing with P11D forms, then you still have a chance to break away from them this year.
Our team can help you get ready to payroll BiKs, whether you want to voluntarily do it this year or wait for it to be mandatory next year.
