Payrolling benefits in kind
Payrolling benefits in kind
All employers will be required to payroll benefits in kind from April 2027. The start date was previously April 2026 but has been deferred by 12 months. This is great news for employers, software providers and advisers who will now have a structured step program of HMRC activity to follow between now and April 2027 in order to prepare fully for the transition to payrolling benefits in kind (PBIK). All will also welcome having more time to prepare for the move to payrolling benefits in kind and to communicate the implications to employees. Read the full announcement and HMRC timeline.
So, what will this mean for your business? The good news is that from April 2027 you will only be required to prepare P11Ds for employees every year if you provide employment related loans or accommodation.
However, moving over to payrolling benefits will mean that your business will need to report more data than before, which could leave more room for error. There are also cash flow implications for both employers and employees for the first year of PBIK and potentially for a longer period for certain employees who might otherwise suffer financial hardship or be affected by the 50% limit on deductions from pay.
Key takeaways for employers
These changes represent a significant shift for all employers. Do not underestimate how complex they are, how many parts of your organisation they might affect and just how long they will take to bed in. You should:
- Ensure that your data collection and payroll systems are ready for payrolling benefits
- Ensure that you have systems in place for the calculation of benefits in each pay period
- Ensure that you have modelled the financial impact of paying Class 1A NIC for both tax years 2026/27 and 2027/28 in the same tax year (employers) and for employees whose codes will be adjusted to collect tax on benefits in real time as well as underpayments for previous years.
Communicate the impact of the changes to your employees.
- You will need time to assess your readiness and get the systems in place for payrolling. Consider payrolling some or all of your benefits from April 2026 on a voluntary basis. This will provide an opportunity to “test” the system while P11Ds are still available as a backup.
Our employment tax specialists are here to help with all aspects of the transition and beyond – if you have any questions on how to prepare, please get in touch.