Changes to Benefits in Kind Processing - April 2027

Payroll Is Taking Over Benefits in Kind: Are You Ready for April 2027?

If you provide company cars or private medical cover, the way you report them is about to change. HMRC has confirmed that mandatory payrolling of Benefits in Kind (BiKs) will begin on 6 April 2027, and the early notice is there to give employers, payroll providers and software developers time to get ready.

Two phases, not one big bang

The change will be introduced in stages. From 6 April 2027, company cars, car fuel, vans, van fuel and employer-provided medical benefits will need to be reported through your payroll software in real time.

A year later, from April 2028, mandatory payrolling will widen to cover most other BiKs. Employment-related loans and accommodation are left out for now, although you can choose to payroll them voluntarily.

Goodbye P11D (mostly)

At the moment, most BiKs are reported once a year on a P11D. Under the new approach, they will be reported through Real Time Information (RTI), with Income Tax and Class 1A National Insurance worked out as you go. In effect, BiKs become part of your regular payroll run rather than a year-end job.

The real challenge: timing

The biggest shift isn't the software. It's the timing. Information that used to be collected after the tax year ended will now need to reach payroll throughout the year. If your benefits data currently sits with HR or finance until April, that handover will need to change.

Where to start

It needn't be daunting. A few simple steps now will save stress later:

• Take stock of the benefits you offer and which will be payrolled from April 2027.

• Map your process for getting BiK information to payroll, and note what needs adjusting.

• Speak to your payroll software provider about their plans.

• Bring payroll, HR and finance together, as they will probably all be involved.

• Watch for HMRC's guidance, which is still being finalised.

What's next?

HMRC is still developing its detailed guidance, with final information for Phase One expected later this autumn. We'll be following it closely and will share updates as they land.