Cloud UK Payroll Software

Mandatory Payrolling of Benefits in Kind Delayed to April 2027

Elena Segura

Cofounder

Apr 28, 2025

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Mandatory Payrolling of Benefits in Kind Delayed to April 2027

The government has announced a 12-month delay to the introduction of mandatory payrolling for most benefits in kind (BiKs) and taxable expenses, giving employers and payroll professionals more time to prepare. The new implementation date is now 6 April 2027 (previously April 2026).

What’s Changing?

From April 2027:

  • Employers will be required to report most BiKs and expenses (such as company cars, health insurance, etc.) via Real Time Information (RTI) using Full Payment Submissions (FPS).

  • Income Tax and Class 1A NICs on BiKs will be collected in real time, rather than through year-end P11D forms.

  • The voluntary registration process for payrolling benefits will end on 5 April 2026 (except for loans and accommodation, which may still be registered for voluntarily from November 2026).

  • Employers will not need to register for mandatory payrolling, but must prepare to adapt systems and processes.

Operational Guidance Highlights

  • Payrolling applies per pay period, with BiKs taxed like earnings.

  • Estimates can be used where final benefit values aren’t yet known.

  • A new BiKs update process will allow corrections after year-end (e.g. for fuel cards, loans).

  • Employers must notify employees of payrolled benefits by 1 June each year.

Transitional Support

  • For 2027–28, no penalties will be issued for RTI errors unless there's deliberate non-compliance.

  • Existing penalties for late filing and payment will still apply.

  • HMRC is updating its Basic PAYE Tools software to support these changes.

Specific Scenarios Covered

The updated guidance also includes provisions for:

  • Employees receiving BiKs after leaving employment

  • Those with low or no income

  • The 50% tax deduction cap

  • Complex cases like globally mobile employees and non-cash termination awards

💡 Employers and payroll professionals are encouraged to begin preparations now to avoid disruption. Draft legislation and technical guidance will begin rolling out from Autumn 2025.

👉 Read the full HMRC technical note and stay updated here:
Visit GOV.UK – HMRC Technical Update on BiKs

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