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