The decision to phase in the mandatory payrolling of benefits in kind is a ‘welcome step’ to allow employers and payroll software providers more time to prepare for significant changes, says the Association of Taxation Technicians (ATT).
What does this mean for me?
Benefits in kind are non-cash perks such as company cars or private medical insurance. Currently, most employers report these once a year using a Form P11D, with tax collected through adjustments to employees’ tax codes.
With the new announcement, the value of these benefits is added to employees’ pay in real time, so the correct tax is deducted through the payroll each month. Although this improves accuracy and transparency it also requires employers to gather detailed information. They must also ensure their payroll systems can handle the changes.
When will the change take place?
Phase 1: From 6th April 2027, mandatory payrolling of BIKs will be phased in for:
Phase 2: From April 2028 the mandatory payrolling of most other BIKs will be introduced. This excludes loans and accommodation which will remain voluntary.
Further information will be released over the summer in align with the Autumn Budget 2026.
