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 seem distant, businesses should begin preparing now to ensure their payroll systems remain compliant and employee benefits are taxed properly.
What changes will BiKs bring?
Payrolling BiKs means taxable non-cash benefits, such as company cars and private medical insurance, will be processed through payroll in real-time rather than calculated and submitted annually.
This change will help 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 shift to real-time reporting will impact how businesses offer staff benefits, especially those with complex packages or many employees receiving taxable benefits.
The key considerations include:
- Technology readiness – Payroll systems must be capable of processing benefits alongside salaries accurately.
- Data integration – HR and payroll teams will need to work together seamlessly.
- Employee communication – Staff must be informed about the changes to their payroll and the impact on their benefits.
- Compliance – Incorrect calculations in real time could create risks that are harder to resolve.
How can employers prepare?
Employers should spend the next year assessing which benefits are reported via P11D and determining whether their payroll system can handle real-time reporting.
Clear communication with your payroll providers is essential to confirm that your system is ready to support payrolling BiKs and to identify any necessary data or system changes.
To minimise the risk of errors, employers may consider investing in technology and training, ensuring that staff responsible for payroll and benefits are fully equipped to process them accurately each month.
How to stay compliant with BiK
Proper preparation for payrolling BiKs is crucial. Salary sacrifice arrangements and consistent monthly calculations must be carefully considered to avoid underpayment of tax.
With the right financial guidance, you can streamline your processes and ensure your payroll and benefits strategies remain both compliant and efficient.
For assistance with reviewing your payroll system and identifying potential risks with BiKs, contact our team today.