Compliance
Preparing for Mandatory Benefits-in-Kind Payrolling: What Employers Need to Know
Starting April 2027, employers must payroll most benefits-in-kind (BiKs); this article guides businesses through upcoming deadlines, how to register now, and mistakes to avoid.
By NomadicTax Research Team • 5-8 min read • March 18, 2026
## What Is Changing & Why It Matters
- From **6 April 2027**, the UK government mandates that **most benefits-in-kind (BiKs)** will be reported and taxed through payroll, rather than via end-of-year P11D forms. ([gov.uk](https://www.gov.uk/government/publications/summary-of-tax-update-spring-2025-simplification-administration-and-reform/tax-update-spring-2025-simplification-administration-and-reform-summary?utm_source=openai))
- This reform applies to many perks: company cars, private medical insurance, loans; anything traditionally listed on P11D could shift into payroll processing. Simplifies for HMRC; demands early preparation for employers. ([gov.uk](https://www.gov.uk/government/publications/summary-of-tax-update-spring-2025-simplification-administration-and-reform/tax-update-spring-2025-simplification-administration-and-reform-summary?utm_source=openai))
## Crucial Deadlines for Employers & Payroll Agents
| Date | Milestone |
|-------|-----------|
| **5 April 2026** | Deadline to register voluntarily to payroll BiKs for the **2026-27** tax year. After this, registration won’t be accepted for that year. ([gov.uk](https://www.gov.uk/government/publications/employer-bulletin-february-2026/february-2026-issue-of-the-employer-bulletin?utm_source=openai))|
| **6 April 2027** | Mandated use of payroll for most BiKs begins. Non-compliance risks penalties. ([gov.uk](https://www.gov.uk/government/publications/employer-bulletin-february-2026/february-2026-issue-of-the-employer-bulletin?utm_source=openai))|
## Practical Steps for Compliance
1. **Audit current BiKs**: Identify all benefits currently reported via P11D; assess which will migrate into payroll under new rules.
2. **Register before 5 April 2026**, even if you plan to start using payroll in the next tax year, to secure the voluntary pathway and avoid rushed transitions. ([gov.uk](https://www.gov.uk/government/publications/employer-bulletin-february-2026/february-2026-issue-of-the-employer-bulletin?utm_source=openai))
3. **Update payroll systems**: Ensure payroll software can handle BiKs reporting and accommodate combined Income Tax and Class 1A NICs via payroll, not via P11D(b). Employers may need to test and train payroll teams.
4. **Communicate with employees**: Employees used to P11D may see different timing or deductions; clarity will reduce disputes.
## Common Pitfalls and How to Avoid Them
- Waiting until late **2026** to start planning—leaving too much to system upgrades.
- Assuming all BiKs are included; check definitions and exemptions carefully.
- Overlooking Class 1A NICs which are often forgotten when changing from end-of-year to payroll basis.
## Example Scenario
- *A small tech company* provides employee benefits such as company-funded travel, medical insurance, and a vehicle. Currently, they submit P11D forms after 5 April. To prepare, they audit their P11D items, estimate additional payroll tax/NICs costs, update payroll contracts in Spring 2026, register by 5 April, and run a dry-run payroll-based projection.
## Bottom Line
These changes aim to smooth and modernize the handling of benefits-in-kind for employers and HMRC. **Acting early reduces risk**, spreads cost and ensures accurate reporting. Starting preparations now through spring 2026 puts you in a strong position.