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article  /  15th Jul 2026

What the new mandatory payrolling rules mean for employers: Benefits in Kind explainedimpact hr ident

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The government has confirmed that mandatory payrolling of many Benefits in Kind (BiKs) will now be introduced from April 2027, giving employers additional time to prepare for a significant change to payroll reporting.

Although this is primarily a payroll change, it will also have implications for HR, finance and business leaders, making it important for organisations to start planning now.

The way employee benefits are recorded, reported and taxed is changing, and businesses will need the right processes in place to remain compliant.

In this article, we’ll explain what Benefits in Kind are, which benefits will be affected by the new rules, what mandatory payrolling means in practice, and the steps employers can take now to prepare for a smooth transition ahead of the April 2027 deadline.

Benefits in Kind

What are Benefits in Kind and what is changing?

Benefits in Kind (BiKs) are non-cash benefits or perks that employers provide to employees in addition to their salary. These can include company cars, private medical insurance, duel for personal use and other taxable benefits. While these perks can be a valuable part of an employee’s reward package, they often have tax implications for both employers and employees.

At the moment, most taxable Benefits in Kind are reported to HMRC at the end of each tax year using P11D forms. Employees then pay any tax due through adjustments to their tax code, meaning the tax isn’t always collected at the time the benefit is received.

From April 2027, many Benefits in Kind will instead need to be processed through payroll as they are provided. This means tax will be collected through PAYE in real time, reducing the need for annual P11D reporting and creating a more streamlined process for both employers and employees.

The aim is to simplify tax reporting, improve accuracy and reduce the need for tax code adjusmtents.

BENEFITS IN KIND

Which Benefits in Kind will be payrolled from April 2027?

Following consultation with employers, payroll professionals and software providers, HMRC has confirmed a phased rollout for the new rules.

From April 2027, mandatory payrolling will apply to:

  • Company cars
  • Car fuel benefits
  • Vans and van fuel
  • Private medical insurance
  • Healthcare benefits

Most remaining Benefits in Kind are expected to move across from April 2028 while employment-related loans and living accommodation will remain outside the mandatory system for the time being.

Although employers have been given more time to prepare, it’s worth using this opportunity to review existing payroll processes and ensure your business is ready well before the deadline.

BENEFITS IN KIND

How Benefits in Kind impact Employers and Employees

The move to mandatory payrolling of Benefits in Kind isn’t just a payroll change. It will affect employers, employees and the way HR, payroll and finance teams work together.

  • Why the new Benefits in Kind rules matter for employers

    While the changes are designed to simplify reporting in the long term, they also place greater emphasis on having accurate systems and processes in place throughout the year.

    Although payroll teams will be responsible for reporting taxable benefits, HR often manages employee benefits, while finance overseas budgeting and compliance. Strong communication between these teams will be essential to ensure information is recorded accurately and reported on time.

    Reviewing your current processes now can help identify any gaps, reduce compliance risks and make the transition to mandatory payrolling much smoother before the April 2027 deadline.

  • What should employers do now?

    Now is a good opportunity to review:

    • How Benefits in Kind are recorded
    • Whether your payroll software is ready for mandatory payrolling
    • How information is shared between HR, payroll and finance
    • Internal reporting processes and controls
    • How changes will be communicated to employees

    Taking the time to review these areas now can help reduce compliance risks and avoid unnecessary disruption closer to implementation.

  • How will mandatory payrolling affect employees?

    For employees, the biggest change will be how tax on Benefits in kind is collected. Instead of tax being adjusted through their tax code after the end of the tax year, employees will generally pay tax through PAYE as the benefit is received.

    This means some employees may notice changes to their monthly payslip or take-home pay, even though the value of their Benefits in Kind hasn’t changed. Collecting tax in real time should reduce unexpected tax code adjustments and make deductions more transparent throughout the year.

    Clear communication from employers will be important to help employees understand why these changes are happening, what they can expect to see on their payslips and reduce any unnecessary confusion.

  • How to prepare for the new Benefits in Kind rules

    Although April 2027 may seem some way off, early planning will make the transition much smoother.

    Employers should consider:

    • Reviewing all Benefits in Kind currently offered to employees
    • Speaking with their payroll provider or software supplier about readiness
    • Reviewing internal processes for recording employee benefits
    • Ensuring HR, payroll and finance teams understand the new requirements
    • Planning employee communications ahead of implementation

    Preparing now gives organisations more time to identify any gaps, budget for potential changes and implement new processes before the legislation takes effect.

  • Benefits of preparing for mandatory payrolling early

    Although the new rules don’t take effect until April 2027, there are clear advantages to receiving your processes now. Early preparation gives businesses time to make improvements without the pressure of an approaching deadline.

    Benefits include:

    • Reduced compliance risk by ensuring Benefits in Kind are reported accurately.
    • Smoother payroll processes with fewer last-minute system changes.
    • Better collaboration between HR, payroll and finance teams.
    • Improved employee experience through clear communication about how Benefits in Kind will be taxed.
    • Greater confidence that your payroll systems are ready for the new HMRC requirements.
  • Benefits in Kind
Benefits in Kind

Stay ahead of changes to Benefits in Kind

Mandatory payrolling of Benefits in Kind is another reminder that employment legislation and employer responsibilities continue to evolve.

While payroll providers will play a key role in implementing the technical changes, HR also has an important part to play in ensuring policies, processes and employee communications remain aligned.

At impact HR, we believe that keeping employers informed is just as important as helping them manage day-to-day people challenges. Staying up to date with legislative developments allows businesses to plan ahead, reduce compliance risks and support employees through change with confidence.

If you’d like to discuss how upcoming employment changes could affect your organisation, our team is always here to help you stay informed and prepared.

Need support preparing for the new Benefits in Kind rules?

The move to mandatory payrolling may still be some way off, but preparing early can help reduce compliance risks and avoid unnecessary disruption. If you’re unsure how the changes could affect your business, our experts are here to help.

Book a free call

Your Questions Answered

Everything you need to know about Benefits in Kind

  • What are Benefits in Kind (BiKs)?Reveal

    Benefits in Kind (BiKs) are non-cash benefits or perks that employers provide to employees in addition to their salary. These benefits form part of an employee’s overall reward package and can include company cars, private medical insurance, fuel for personal use and other taxable perks. Because these benefits have a financial value, many are subject to Income Tax and National insurance, meaning employers have reporting obligations to HRMC.

  • What is mandatory payrolling of Benefits in Kind?Reveal

    Mandatory payrolling of Benefits in Kind means employers will report and tax most taxable employee benefits through payroll instead of submitting annual P11D forms. Rather than adjusting an employee’s tax code after the end of the tax year, tax will be deducted through PAYE as the benefit is received. The aim is to simplify reporting, improve accuracy and reduce the administrative burden for employers over time.

  • When do the new Benefits in Kind rules start?Reveal

    The new mandatory payrolling rules for most Benefits in Kind will take effect from April 2027. Following consultation with employers and payroll professionals, HMRC delayed implementation to give organisations more time to prepare. Most remaining taxable benefits are expected to move to mandatory payrolling from April 2028, although employment-related loans and living accommodation are currently excluded.

  • What Benefits in Kind will be payrolled first?Reveal

    From April 2027, mandatory benefits will apply to:

    • Company cars
    • Car fuel benefits
    • Vans and van fuel
    • Private medical insurance
    • Healthcare benefits

    HMRC has confirmed that additional Benefits in Kind are expected to be included from April 2028.

  • How will mandatory payrolling affect employees?Reveal

    Employees will usually pay tax on their Benefits in Kind through PAYE as they receive the benefits, rather than through changes to their tax code after the end of the tax year. This may result in different tax deductions appearing on monthly payslips.

  • Will employers still need to submit P11D forms?Reveal

    For Benefits in Kind that are subject to mandatory payrolling, employers will generally no longer need to submit P11D forms. However, P11Ds may still be required that remain outside of the mandatory payrolling system until further charges are introduced.

Where to find out more A collection of hand-picked useful resources for Benefits in Kind from impact HR and beyond

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