What’s Changing
From 6 April 2026, voluntary registration to report benefits in kind (BIK) in real time via payroll software will be phased out. From tax year 2027–28 onwards, all employers will be mandated to report and pay both income tax and Class 1A National Insurance on benefits in kind in real time. (gov.uk)
Why It Matters
- Real-time reporting brings benefits into payroll processing rather than annual submission via forms P11D, improving accuracy and reducing late filings. (gov.uk)
- Employers must have systems capable of capturing, reporting, and paying tax and NI for all BIKs as they occur—not just at year-end.
Scope & Timeline
| Date | What Employers Should Do |
|---|---|
| Now–6 April 2026 | Begin assessing payroll software and internal processes to ensure BIKs are captured throughout the year. |
| From 6 April 2026 | Voluntary registration closed. Employers can no longer opt in early via voluntary route. |
| From tax year 2027-28 (i.e. from 6 April 2027) | All employers must report benefits in kind in real time; P11D and P11D(b) forms will be superseded by ongoing payroll reporting. |
What Counts as Benefits in Kind
Benefits include (but aren’t limited to):
- Company cars, fuel, loans, private medical insurance
- Reimbursements, even if partial, for expenses such as additional home-working costs, exceeding certain allowances. Note: from 6 April 2026, employees lose the deduction for “unreimbursed additional household expenses.” (gov.uk)
Practical Steps for Employers
- Audit your existing benefits: List all BIKs currently reported via P11D or reimbursed voluntarily.
- Upgrade payroll software: Ensure payroll can capture BIK amounts in real time and transmit correctly to HMRC.
- Educate payroll and HR teams: Clarify deadlines, rates (tax & NI), and what counts as a benefit.
- Communicate with employees: Explain how certain expenses or benefits will now be reported through payroll; review pay-packets for surprises.
- Review tax codes: Employee tax codes may adjust based on new deductions removed (e.g. unreimbursed home/work expenses).
Example Scenarios
- Example A: An employer who provided home-working equipment now reports that equipment’s taxable value in payroll during the year instead of via P11D at year-end.
- Example B: A staff member who previously paid out of pocket for additional internet costs and claimed via expenses—this deduction is removed as of 6 April 2026, so employer must decide whether to reimburse or treat differently.
Key Takeaways
- Businesses must act now to ensure readiness by April 2026.
- Failure to report in real time once mandated may lead to penalties or non-compliance issues.
- Although some preparation time exists, the transition entails tech, policy, and payroll process changes.
Bottom line: Employers should audit benefits, check systems, and shift from P11Ds to real-time reporting to stay compliant and avoid surprises.