HMRC has announced that mandatory payrolling of benefits-in-kind (BIK) will be delayed until April 2027, rather than proceeding in April 2026 as initially planned.
What is a benefit-in-kind?
A benefit-in-kind (BIK) is any non-monetary perk or service with a financial worth that an employer provides to an employee for personal use. Termed as ‘fringe benefits’, these non-cash provisions do not meet the criteria of being ‘wholly, exclusively, and necessary’ for the conduct of business, and are therefore recognised as benefit-in-kinds.
A broad range of provisions can be classed as BIK, including (but not limited to) company vehicles, private medical insurance, and more. These benefits contribute to the employee’s overall employment income and tax must be accounted for on both their salary and benefits received.
What are payrolling benefits?
Payrolling benefits include the benefits received by each employee in their PAYE calculation, so the income tax is paid at source each month. The monthly benefit being payrolled can be adjusted throughout the year if the benefit position changes for employees ensuring the tax by them is adjusted more efficiently. The only benefits that cannot currently be payrolled are accommodation benefits and low or interest-free loans.
The benefits of payrolling
- The benefit amount is included as taxable pay and the income tax is paid through RTI so the tax is being paid at the right time rather than relying on HMRC to change tax codes, which can lead to underpayments/overpayments.
- Fewer queries in relation to tax codes as they will not need to be adjusted for benefits.
- Removal of the requirement to complete forms P46(car) to notify HMRC of changes to company cars.
- The annual P11d and P11db forms and payment will no longer be required unless benefits are provided that cannot be payrolled.
- Information held with HMRC is more up to date.
Registration
Registration to payroll benefits can be done through the employer’s PAYE account. Some employers might choose to register early and start payrolling benefits from April 2026 to ensure they get processes in place before they become mandatory in April 2027.
What to do now
If you would like more information on payrolling benefits or if you would like Baker Tilly Mooney Moore to look after your payroll to ensure you meet your employer obligations under this new regime, please do not hesitate to contact us at payroll@bakertillymm.co.uk