Compliance
Preparing for Mandatory Payrolling of Benefits in Kind in the UK from April 2027
UK employers face changes in how benefits in kind and expenses are reported—voluntary registration opens now, full roll-out next tax year
By NomadicTax Research Team • 5-8 min read • February 20, 2026
## Overview of the Change
The UK’s HM Revenue & Customs (HMRC) is moving to **mandatory payrolling** of most *Benefits in Kind* (BiKs) and expenses starting **6 April 2027**. ([gov.uk](https://www.gov.uk/government/publications/employer-bulletin-february-2026/february-2026-issue-of-the-employer-bulletin?utm_source=openai)) Employers must register *before* the start of the 2026-27 tax year if they want to begin *voluntary* payrolling. Voluntary registration closes on **5 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 Employers Must Do Now (2026-27 Tax Year)
- **Review the interim guidance** to understand which BiKs are included and how real-time reporting will work. ([gov.uk](https://www.gov.uk/government/publications/employer-bulletin-february-2026/february-2026-issue-of-the-employer-bulletin?utm_source=openai))
- **Register for voluntary payrolling** before **5 April 2026** if you want to test the system early. ([gov.uk](https://www.gov.uk/government/publications/employer-bulletin-february-2026/february-2026-issue-of-the-employer-bulletin?utm_source=openai))
- Update payroll systems to version **26.0 or later** from **6 April 2026**, to support the 2026-27 tax year. ([gov.uk](https://www.gov.uk/government/publications/employer-bulletin-february-2026/february-2026-issue-of-the-employer-bulletin?utm_source=openai))
- Train your **HR, payroll, and finance teams** on the incoming changes to avoid misreporting. Consider the impact on taxable benefit treatment, timing and how employees will see pay and deductions.
## Employer Compliance Example
- An employer providing an interest-free loan as a benefit will need to payroll the taxable value of that benefit rather than having separate reporting and possibly late assessments. Under new rules, this becomes part of payroll from 2027, but to do so correctly, employer must register early if using voluntary route during 2026-27.
## Employee Impacts and Opportunities
- Employees receiving BiKs will see **tax on those benefits deducted directly through payroll** instead of being billed separately. This improves clarity and can simplify personal tax returns.
- Ensure that employees understand the **change in timing** and method of deduction to avoid surprises when those deductions first show up in payroll.
## Risks and Mitigation
- If employers don’t update payroll software or register voluntarily now, they might face compliance issues or adjustments in 2027.
- Reporting errors during the voluntary period could set problematic precedents. Use early registration as a test run.
- Employees may have concerns about net pay changing due to more deductions—clear communication is critical.
## Action Checklist
- Audit your current benefits in kind and expenses offered to employees.
- Ensure your payroll software provider will support version 26.0 functionality.
- Communicate with employees now so they understand benefit changes.
- Adjust budgeting and forecasting to reflect possible changes in employer and employee cash flows.
## Why This Matters
Mandatory payrolling simplifies tax administration by reducing the need for separate self-assessment or petitions related to BiKs, improves transparency, and aligns with HMRC’s plan to modernize and digitalize payroll reporting. For both employers and employees, getting ahead of this change will reduce disruptions and compliance risks.