From 6 April 2027, the way certain Benefits in Kind (BiKs) are reported and taxed is changing.

Mandatory real-time payrolling will begin for certain benefits, moving employers away from relying solely on the traditional year-end reporting process.

April 2027 may sound a long way away, but businesses providing benefits to employees should start preparing now.

What’s changing with Benefits in Kind from April 2027?

HMRC is introducing mandatory real-time reporting of certain Benefits in Kind through payroll software and Real Time Information (RTI).

The changes are being phased in.

From 6 April 2027, mandatory payrolling will initially apply to:

  • Company cars
  • Car fuel
  • Vans
  • Van fuel
  • Employer-provided medical benefits

Most remaining Benefits in Kind are expected to move to mandatory payrolling from April 2028, while the timing for employer-provided loans and accommodation will be confirmed separately.

Why is HMRC changing the system?

The intention is to move the taxation and reporting of Benefits in Kind closer to real time.

Rather than certain tax consequences being dealt with through an end-of-year process, the new system will increasingly incorporate benefits into regular payroll reporting.

For employees, that should ultimately mean tax is collected closer to when the benefit is received.

For employers and payroll teams, however, it means processes need to change.

Why should employers prepare now?

Real-time reporting depends on real-time information.

Businesses will need appropriate processes to make sure their payroll team receives accurate details about relevant employee benefits at the right time.

That may involve reviewing:

  • How benefits information is collected
  • Who is responsible for providing it
  • How quickly changes are communicated to payroll
  • Whether existing payroll software will support the requirements
  • The quality and accuracy of employee benefit data
  • How payroll, HR and finance teams communicate with one another

HMRC itself has warned businesses not to underestimate the preparation required.

What happens to P11Ds?

The move towards mandatory payrolling changes the role of traditional year-end Benefits in Kind reporting.

The important point for employers is not simply whether a particular form will still be required. It’s that the underlying reporting process is moving from annual towards real time.

That requires a change in mindset as much as a change in software.

What about other Benefits in Kind?

The introduction is being phased.

Most remaining Benefits in Kind are expected to enter mandatory payrolling from April 2028.

This gives employers additional time to prepare, but businesses with company cars, vans, fuel benefits or employer-provided medical benefits need to focus on the earlier April 2027 date.

What should employers do now?

Start by identifying which Benefits in Kind you currently provide.

Then review how that information reaches your payroll provider.

Ask yourself:

If an employee’s benefit changed tomorrow, how quickly would payroll know?

If the answer is “when we prepare the P11Ds”, your processes are likely to need attention.

How Barrons can help

The move to real-time Benefits in Kind reporting isn’t something businesses should discover in their April 2027 payroll run.

Barrons can help employers review their existing Benefits in Kind and payroll arrangements, understand which changes affect them and prepare their processes ahead of implementation.

Speak to the Barrons Payroll team to start preparing.

The rules and HMRC guidance continue to develop. This article reflects the position at the date of publication and is intended as general information.