Preparing for Mandatory Real-Time Payroll Reporting of Benefits in Kind from April 2027

Overview of the Change

From 6 April 2027, the UK government is mandating that most Benefits in Kind (BiKs) are reported and taxed in real-time through payroll software, rather than via the annual P11D / P11D(b) process. This covers Income Tax and Class 1A National Insurance Contributions (NICs). (gov.uk)

What Is in Scope, What’s Still Deferred or Voluntary

• Included in Mandatory Real-Time Reporting (from April 2027):

  • Most BiKs except employment-related accommodation and beneficial loans (these are voluntary initially). (gov.uk)
  • Tax values and NICs on BiKs will be reported via Full Payment Submission (FPS)—the same payroll feed used for salaries. (gov.uk)

• Voluntary options earlier:

  • Employers can voluntarily payroll BiKs (excluding accommodation and loans) from April 2026 to prepare for the 2027 change. (gov.uk)

Impacts for Employers and Payroll Teams

• Payroll software must be capable of calculating BiK values in year, not just retrospectively.
• Systems and data flows will need upgrades to gather relevant invoice/valuation information in timely fashion.
• Late valuation or incomplete information might require estimates—with adjustments at year-end (before 6 July) via an update process. Employers must also record any underpay or overpay, reconciling in P800/Self Assessment if applicable. ICAs must track these transitions carefully. (gov.uk)

Example Scenario

Sarah owns a company; she provides staff with company cars and fuel cards. Under the old system, she fills in P11D forms post-year end. Under new rules, the taxable value for fuel cards and company cars (minus exempt mileage etc) must be reported each RTI submission alongside salary from April 2027. If value for some BiK is unknown by tax year end (e.g., unexpected invoice), she may need to estimate and correct in July.

Action Plan for Employers

• Audit current BiKs provided: list all benefits that are currently P11D reported.
• Assess payroll software readiness: ensure system updates or procure updates to handle BiK data, including real-time entry of values.
• Train payroll professionals: ensure understanding of FPS, RTI, tax and NIC treatment.
• Communicate with employees about what changes—for example, employees may see different code deductions or tax values during the year.
• Plan voluntary payrolling from April 2026 as pilot to test workflows.

Risk & Compliance Considerations

• Risk of penalties or interest where reporting fails or is inaccurate; though HMRC states penalty waivers for year 1 (2027-28) under adjustment process. (gov.uk)
• Be wary of late invoices; good practices in capturing vendor data are essential.

Aheads of this change, proactive planning can avoid last-minute scramble and ensure compliance. Those who act early—via voluntary systems in 2026—can smooth the transition.