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Preparing for Mandatory Payrolling of Benefits-in-Kind: What Employers Need to Know

From April 2027 UK employers must shift Most Benefits-in-Kind reporting into payroll software. Here’s a guide to prepare now and avoid penalties.

By NomadicTax Research Team • 5-8 min read • June 28, 2026

## Overview of the Change The UK government has confirmed that from **6 April 2027**, most employers will be **required to report and pay Income Tax and Class 1A National Insurance** contributions on Benefits-in-Kind (BiKs) through payroll software—known as *mandatory payrolling*.([gov.uk](https://www.gov.uk/government/publications/reporting-and-paying-income-tax-and-class-1a-national-insurance-contributions-on-benefits-in-kind-in-real-time-an-update?utm_source=openai)) Currently businesses can voluntarily payroll BiKs, but that option will be removed starting in 2027. Employers must **register by 5 April 2026** if they wish to payroll for tax year 2026/27; after that, registration closes.([gov.uk](https://www.gov.uk/government/publications/employer-bulletin-february-2026/february-2026-issue-of-the-employer-bulletin?utm_source=openai)) ## Which Benefits Are Affected and When - Phase 1 (from **6 April 2027**): Mandatory payrolling of **company cars, car fuel, vans, van fuel, and employer-provided medical benefits**.([swgroup.com](https://www.swgroup.com/insights-events/insights/tax-update-june-2026/?utm_source=openai)) - Phase 2 (from **6 April 2028**): Most other benefits (excluding certain loans and accommodation) will also be made mandatory.([swgroup.com](https://www.swgroup.com/insights-events/insights/tax-update-june-2026/?utm_source=openai)) ## What Employers Should Do Now 1. **Audit all Benefits-in-Kind your company offers.** Identify which ones are affected immediately and which are coming later. 2. **Update payroll systems and software.** Ensure systems can capture BiKs reporting in real time. Some vendors offer early beta programs. | 3. **Train payroll, HR, and finance teams.** They need to understand how taxable values for various BiKs are calculated and when deductions are made. | 4. **Register for voluntary payrolling by deadline.** If you plan to use payroll for any affected BiKs in 2026/27, complete voluntary registration before **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)) ## Examples to Illustrate the Impact - A company car user will see changes in how fuel and emissions are taxed. Employers must report these through payroll rather than via end-of-year forms. | - Medical benefits: employer-provided private healthcare / medical services must now be added to payroll in 2027 (phase 1 changes) rather than being declared manually at year end. | ## Risks of Non-Compliance - **Late or inaccurate registration** can lead to penalties if benefits are reported incorrectly. | - **Software or system gaps** can mean missing deadlines or failing to include certain types of BiKs. | - **Failure to keep good documentation**, especially for “making good” payments for employees—these must align with reporting deadlines. | ## Summary Mandatory payrolling signals a shift toward **real-time, digital reporting** for taxation in the UK. Employers who start preparing now—auditing benefits, upgrading systems, training staff—will avoid confusion and ensure accurate compliance by the April 2027 deadline.