Compliance
How UK Businesses Should Prepare for Mandatory Payrolling of Benefits in Kind
Understanding the phase-in dates, categories affected, and what employers need to do now to comply with upcoming payrolling of benefits in kind requirements.
By NomadicTax Research Team • 5-8 min read • August 22, 2026
## What is Payrolling of Benefits in Kind (BiKs)?
Employers provide certain non-cash benefits to employees — company cars, private medical insurance, subsidised loans, etc. Traditionally, taxes on these benefits are reported via forms like **P11D** and taxed in advance. Payrolling allows these taxes to be deducted through payroll in real time.
## Phase-in Timeline & Key Dates
| Phase | Effective Date | Benefits Covered |
|-------|----------------|------------------|
| Phase 1 | 6 April 2027-5 April 2028 | **Company cars, car fuel, vans, van fuel, medical benefits** |
| Phase 2 | From 6 April 2028 | Nearly all other benefits in kind (loans, accommodation, etc.) |
| Voluntary registration for Phase 2 benefits | November 2026 | Employers can opt in early for benefits outside Phase 1 |
## What Employers Need to Do Now
- **Review your benefits package**: Identify which benefits you currently offer that fall into Phase 1 and which are deferred until 2028.
- **Assess payroll systems & software**: Ensure payroll software can handle payrolling of BiKs and adjusting PAYE codes accordingly.
- **Communicate with employees**: Staff receiving affected benefits should be informed early, as their take-home pay may change due to real-time tax deductions.
- **Seek voluntary registration** if you wish to include more categories early (in Phase 2 benefits). Begins November 2026.
## Practical Examples
- A company car user in a Phase 1 category (e.g. car benefit) will see tax deducted via payroll starting from first pay period after 6 April 2027, rather than via P11D at year end.
- An employer with staff receiving subsidised loans or accommodation can choose to voluntarily payroll these from November 2026, even though mandatory status is not until April 2028.
## Benefits & Risks
**Pros**:
- Smoother cash flow for employees (no unexpected tax bills at year end).
- Simpler administration for HR & payroll teams.
- Better forecasting of tax liabilities.
**Cons**:
- Requires updated payroll systems and processes.
- Employees may initially see lower net pay due to more frequent deductions.
- Compliance risk if employers miss voluntary registration deadlines or misclassify benefits.
## Actionable Checklist
- Audit current benefits and classify by Phase
- Confirm payroll software providers support payrolling features
- Update internal policies and train payroll/HR staff
- Inform employees before April 2027 of how changes will affect them
- Monitor HMRC guidance and updates, particularly around voluntary registration