Compliance
Navigating the Mandatory Payrolling of Benefits-in-Kind: What Employers Must Prepare by April 2027
Mandatory payrolling of most benefits-in-kind (BiKs) is coming; employers must register before the deadline and understand the change into payroll systems now.
By NomadicTax Research Team • 5-8 min read • March 7, 2026
## Overview of the change
Starting with the **2027-28 tax year**, employers in the UK will be required to **payroll most benefits-in-kind (BiKs)**. Instead of employees reporting non-cash benefits after year-end via P11D forms, those benefits will form part of the regular payroll with tax and National Insurance deducted from each pay period. ([gov.uk](https://www.gov.uk/government/publications/employer-bulletin-february-2026/february-2026-issue-of-the-employer-bulletin?utm_source=openai))
Until then, there is a voluntary window: registration for voluntary payrolling ends on **5 April 2026**. After that date and into 2027-28, payrolling of most BiKs becomes mandatory. ([gov.uk](https://www.gov.uk/government/publications/employer-bulletin-february-2026/february-2026-issue-of-the-employer-bulletin?utm_source=openai))
## Key actions for employers
- **Register for voluntary payrolling** before **5 April 2026**, if you want to start early. Once the tax year begins, you can no longer opt in. ([gov.uk](https://www.gov.uk/government/publications/employer-bulletin-february-2026/february-2026-issue-of-the-employer-bulletin?utm_source=openai))
- **Adapt payroll software and processes**: ensure your payroll systems can handle benefits-in-kind and link them to full payment submissions (FPS). Update to the latest versions if using HMRC’s Basic PAYE Tools. ([gov.uk](https://www.gov.uk/government/publications/employer-bulletin-february-2026/february-2026-issue-of-the-employer-bulletin?utm_source=openai))
- **Communicate with employees** about the change: BiKs will affect net pay each period instead of via deductions or adjustments post-year-end. The timing and amount could affect employee budgeting.
## Implications and examples
**Example 1**: Sarah has a company car, health insurance, and a phone from her employer. Under the old system, values of those benefits are declared in P11D forms after 5 April, with tax paid after. Under new rules, starting from 2027-28, these are processed in each wage-run, meaning tax and National Insurance are deducted before each pay date.
**Example 2**: Small employer using free payroll software: must ensure their software supports BiKs payrolling and the relevant indicators. They should test systems before deadlines, update tools. If using Basic PAYE Tools (BPT), make sure to use version 26.0 from 6 April 2026. ([gov.uk](https://www.gov.uk/government/publications/employer-bulletin-february-2026/february-2026-issue-of-the-employer-bulletin?utm_source=openai))
## What stays the same and what changes
| Area | Old system | New system |
|---|---|---|
| Reporting BiKs | Annual P11D forms + P11D(b) submission by 6 July (following tax year end) | Incorporate into payroll; regular FPS reporting |
| Employee impact | Lump-sum tax or later adjustments | Gradual deductions each period |
| Employer burden | Compile data at year-end; calculate values; file returns | Regular payroll adjustments; setup required software/process beforehand |
## Preparing now: a checklist
- [ ] Review what benefits-in-kind your employees receive and value them
- [ ] Assess current payroll software’s compatibility with BiKs payrolling
- [ ] Register voluntary payrolling if desired before 5 April 2026
- [ ] Update to required software versions (for example BPT 26.0 for new tax year) and check software vendors have planned BiKs support
- [ ] Train payroll staff and communicate changes to impacted employees
**Why it matters**: Moving to real-time reporting reduces delays and surprises in tax liabilities, but it will affect cash flow for employees and require organizations to adjust their internal payroll and HR systems.
**Final note**: These changes are coming, not optional. Significant transition time—but the earlier you act, the less last-minute scramble.