Mandatory Payrolling of Benefits in Kind (BiKs): Q&A for UK Employers

A collection of the most common questions employers, directors, payroll operators, and employees will ask about mandatory payrolling starting April 2026.

What is Mandatory Payrolling of Benefits in Kind in the UK?

Mandatory payrolling is a new HMRC requirement starting April 2026 where all taxable Benefits in Kind must be taxed through payroll in real time instead of being reported through annual P11Ds.

When does mandatory payrolling start?

Mandatory payrolling begins in April 2026 for all UK employers.

Do I still need to complete P11Ds after April 2026?

You will not need P11Ds for any benefits that are payrolled. You will still need P11D(b) to report Class 1A NICs.

Which Benefits in Kind must be payrolled?

Most taxable benefits, including cars, private medical insurance, loans, accommodation, and gym memberships.

How does payrolling a benefit actually work?

The taxable value of the benefit is added to taxable pay, PAYE is calculated, and the benefit amount is removed before final pay is issued.

Does the employee receive the benefit value as cash?

No. It only increases taxable pay so PAYE tax can be collected.

What happens if the employee’s pay is too low to collect the tax?

The employer must not reduce pay below minimum wage. Outstanding tax can be collected later in the year or reported to HMRC if uncollectible.

What happens if an employee leaves during the year?

The employer must report the benefits up to the leaving date, include them on the P45, and address uncollected tax.

Do payroll systems need to change for mandatory payrolling?

Yes. Payroll systems must support additional FPS reporting fields.

What additional FPS fields are needed?

Benefit type, benefit amount, start date, end date, year-to-date values, and annualised amounts.

Will Class 1A NICs still apply?

Yes. They will continue to be reported through the P11D(b) process.

How can employers prepare for mandatory payrolling?

By reviewing all benefits, checking software capability, updating processes, training teams, and communicating with employees.

FAQ

Is mandatory payrolling the same as voluntary payrolling?

No. Voluntary payrolling was optional. Mandatory payrolling is required for all employers from April 2026.

Are any benefits excluded from mandatory payrolling?

Some complex cases, such as certain living accommodation arrangements, may still require P11Ds.

Will employees' payslips change?

Yes. Payslips will show payrolled benefits and how they affect taxable pay.

Can employers choose not to payroll certain benefits?

No. HMRC requires payrolling for all taxable benefits unless legislation specifically excludes them.

What happens if I make a mistake?

Errors must be corrected through the next FPS or a payroll correction submission.

Will HMRC update the guidance before 2026?

Yes. HMRC will release final legislation, examples, and reporting specifications before the deadline.

Does mandatory payrolling affect salary sacrifice arrangements?

Only if the benefit has taxable value; the rules for Optional Remuneration Arrangements (OpRA) still apply.

Is mandatory payrolling beneficial for employees?

Yes. It reduces tax code errors and avoids unexpected tax bills.