The Government has announced an extension for the introduction of mandatory payrolling for benefits in kind (BIKs) and taxable employment expenses, now set to begin in April 2027 (previously April 2026). This extension has been announced to provide additional time for employers, payroll professionals, software providers, and tax agents to prepare for the change.
Introduction and Purpose
For those who are not aware of the proposals, the aim of payrolling BIKs is to streamline the reporting of BIKs and taxable expenses through payroll software, ensuring real-time reporting and payment of Income Tax and Class 1A National Insurance contributions (NICs).
Mandatory Payrolling
From April 2027, most BIKs and expenses will need to be reported through Real Time Information (RTI) using the Full Payment Submission (FPS) process. At this stage some BIKs will not be mandatory, such as employment-related loans and accommodation, but employers can register to report them on a voluntary basis from April 2027. For those benefits that are not mandatory the existing reporting of BIKs on forms P11D and P11D(b) will continue.
Penalties and Interest
For the first year (2027-2028), penalties for inaccuracies will not be charged unless there is deliberate non-compliance. Existing late filing and late payment penalties for RTI returns will still apply.
Registration
Employers will not need to register for mandatory payrolling, except for loans and accommodation benefits. Voluntary registration for these benefits will open in November 2026.
Future Updates and Timeline
HMRC will continue to engage with stakeholders and publish draft legislation, guidance, and technical specifications from Autumn 2025 onwards. In anticipation of mandatory payrolling, HMRC will remove BIK out of employees’ PAYE codes for 2027/28 so that they are not taxed twice.
Conclusion
The P11D forms have been around since the early 1960s. Love them or hate them, this will be a big change for employers and the reporting of BIKs and taxable employment expenses.
If you would like to discuss any of the changes outlined above, please do get in touch.
