Compliance
Mandatory Payrolling of Benefits in Kind: What Employers Must Know Before April 2027
From April 2027 UK employers will have to report and pay tax and National Insurance on most benefits in kind (BiKs) in real time via payroll software—a shift with big implications for payroll and HR teams.
By NomadicTax Research Team • 5-8 min read • February 17, 2026
## What is Changing
The UK government is mandating that **most Benefits in Kind (BiKs)** and related expenses are reported and taxed **in real time** through payroll software from **6 April 2026** (reporting) and will become **mandatory for most BiKs** from **6 April 2027**.([gov.uk](https://www.gov.uk/government/publications/reporting-and-paying-income-tax-and-class-1a-nics-on-benefits-in-kind-in-real-time/confirming-plans-to-mandate-the-reporting-of-benefits-in-kind-via-payroll-software-from-april-2026?utm_source=openai))
Until now, many BiKs have been declared using end-of-year forms (P11D / P11D(b)), with Class 1A NICs paid separately. Under the new system, BiKs (excluding certain employment-related loans and living accommodation initially) will be reported via payroll. However, from **April 2027**, loans and accommodation biKs will also be brought in but under a voluntary process initially.([gov.uk](https://www.gov.uk/government/publications/reporting-and-paying-income-tax-and-class-1a-nics-on-benefits-in-kind-in-real-time/confirming-plans-to-mandate-the-reporting-of-benefits-in-kind-via-payroll-software-from-april-2026?utm_source=openai))
## Timeline & Key Deadlines
- **5 April 2026**: final date for employers to **register for voluntary payrolling** of BiKs for the 2026-27 tax year, especially for loans and accommodation. After this date, the voluntary registration tool closes.([gov.uk](https://www.gov.uk/government/publications/employer-bulletin-february-2026/february-2026-issue-of-the-employer-bulletin?utm_source=openai))
- **6 April 2026**: All real time reporting via payroll required for most BiKs (excluding loans and accommodation).([gov.uk](https://www.gov.uk/government/publications/reporting-and-paying-income-tax-and-class-1a-nics-on-benefits-in-kind-in-real-time/confirming-plans-to-mandate-the-reporting-of-benefits-in-kind-via-payroll-software-from-april-2026?utm_source=openai))
- **6 April 2027**: Mandatory payrolling for most BiKs & expenses; loans & accommodation also included under the new rules (with timeline).([gov.uk](https://www.gov.uk/guidance/draft-guidance-and-legislation-to-aid-preparation-for-reporting-benefits-in-kind-in-real-time/getting-ready-for-mandatory-payrolling-of-benefits-in-kind?utm_source=openai))
## Who’s Affected Most
- Employers of all sizes who offer benefits to employees—company cars, vouchers, health insurance, etc.
- Payroll software providers—must ensure systems handle real-time reporting, value calculations, submission via FPS (Full Payment Submission).
- Employees receiving BiKs—will see changes in how tax is deducted, possibly different tax codes, closer alignment between value and tax paid in same year provided.
## Practical Implications & Real-World Example
**Example:** Acme Ltd provides a company car and private medical cover to its sales director. Under old system: the sales director receives a P11D end of the year; tax is collected via tax code the following year. Under new rules: from April 2026, most BiKs (car, medical) would be reported in real time via payroll software. From April 2027, even accommodation or loans (e.g. interest-free) get included. The director’s monthly deductions may increase in the year of receipt.
## Preparation & Action Plan
- **Audit all types of BiKs** your employees receive. Classify which are currently reported via P11D and which will need to shift to payroll.
- **Upgrade or validate payroll software** to ensure it can handle Full Payment Submissions including BiKs and Class 1A NICs.
- **Review internal HR & payroll workflows** to ensure benefit providers feed timely data into payroll before the tax year ends.
- **Communicate proactively with employees**—explain how their pay packets and tax codes may change.
- **Budget for transitional cashflow** implications: overlapping liabilities may occur (employers paying tax for 2026-27 under P11D while starting new deductions for the same year’s BiKs).([gov.uk](https://www.gov.uk/guidance/draft-guidance-and-legislation-to-aid-preparation-for-reporting-benefits-in-kind-in-real-time/getting-ready-for-mandatory-payrolling-of-benefits-in-kind?utm_source=openai))
## Risks, Opportunities & Best Practices
- **Risk of misreporting or missing deadlines**: penalties likely after full implementation from April 2027.
- **Opportunity for cleaner payroll & fewer forms**: streamlined admin and clarity for employees.
- **Best practice**: early voluntary registration for loans & accommodation BiKs to smooth transition and test systems.
- Use this change as impetus to review entire benefits programme: evaluate whether certain benefits are still cost-effective once tax and NI are accounted for in real time.
This move toward real-time reporting underscores the UK tax system’s push for fairness and modernisation. Employers who stay ahead will reduce risk and optimise their payroll processes.