Employer Obligations Under UK’s Mandatory Payrolling of Benefits-In-Kind (BiKs)

What Employers Need to Know: Payrolling BiKs Timeline

As per the February 2026 Employer Bulletin, UK employers face important upcoming changes regarding reporting of benefits in kind (BiKs):

• By 5 April 2026, employers who wish to voluntarily payroll most BiKs for the 2026-27 tax year should register using HMRC’s tool. (gov.uk)
• From 6 April 2027, reporting most BiKs via payroll will be mandatory. There will be no voluntary registrations after 5 April 2026. (gov.uk)

What “Benefits-In-Kind” Includes

Some examples:

• Private use of company cars, fuel benefits
• Employee accommodation or beneficial loans offered by employers
• Non-cash perks such as health insurance, school fees, or meals provided by firms

Why the Change Matters (Compliance Risks)

• If you don’t payroll BiKs, you may face delays in reporting or be less compliant, which could trigger penalties.
• Clearer alignment of PAYE codes throughout the year—employee tax codes may change to reflect benefit values.
• Increases transparency, reduces errors in P11D/P11D(b) returns.

How Employers Should Prepare

1. Conduct an audit of current BiKs: Identify which benefits you already pay and which ones might be new or less documented.
2. Register for voluntary payrolling prior to 5 April 2026 if you plan to start early.
3. Update payroll systems: Calculate cash equivalent values monthly; ensure Payroll Software or HR systems can capture accurate values.
4. Train staff and communicate: HR and finance teams must understand the new process; employees should be informed of potential changes to take-home pay or reports of benefits.
5. Monitor guidance updates: HMRC has promised regular updates and technical specifications. (gov.uk)

Example Scenario

• TechCo Ltd. currently reports car and accommodation benefits annually on P11D. If they begin voluntary payrolling for 2026-27, they'll need to register by 5 April 2026, then payroll those benefits via monthly payroll, instead of waiting for the annual return.
• RetailCorp misses the registration deadline—they will have to continue using P11Ds for 2026-27, but must transition to mandatory payroll reporting by April 2027.

Action Items Checklist for UK Employers

Conclusion

Mandatory payrolling of BiKs represents a major compliance shift for UK employers. Taking steps now to understand, register, and adapt processes will help minimize risk and ensure smooth transition. With careful advance planning, the change can provide clarity and consistency for employers and employees alike.