The Government’s decision to delay the mandatory payrolling of benefits in kind (BIK) and taxable employment expenses until April 2027 has bought businesses more time.
However, if your business is currently operating payroll in-house, this is not a moment to relax, but an opportunity to get ahead and stay ahead.
At our firm, we work with employers of all sizes to manage payroll.
While may seem a long way off, in payroll terms, it is closer than you think.
What is changing for benefit in kind and payroll reporting?
Currently, BIKs are typically reported after the end of the tax year via P11D forms.
Some employers choose to payroll certain benefits voluntarily, but this requires advance registration with HM Revenue & Customs (HMRC) and is limited in scope.
In 2027, all that changes.
The reporting of most BIK and taxable expenses will move to real-time, becoming part of your standard Full Payment Submissions (FPS) through PAYE.
Employers will need to calculate the cash equivalent of each benefit and apply Income Tax and Class 1A National Insurance (NICs) within payroll, every period.
P11Ds will become largely redundant, aside from a few exceptions like employment-related loans and accommodation.
This means no more retrospective adjustments, and no more end-of-year admin.
However, it also means responsibility and more risk if you are not ready.
What are the risks for businesses?
For in-house payroll teams, the transition will require systems, processes, and training to be in place well ahead of 2027. Key risks include:
- Incorrect benefit valuations leading to underpaid tax or NICs
- Software limitations unable to handle real-time BIK calculations
- Compliance gaps from missed registrations or incorrect estimations
- Employee confusion as real-time deductions overlap with existing tax code adjustments
In short, this is not something that just affects payroll. It is a strategic HR, finance and tax issue.
Making the most of the breathing room
The delay gives employers space to test, review and improve. That means:
- Mapping out which BIKs you currently offer
- Reviewing payroll and HR systems for compatibility with real-time payrolling
- Modelling cashflow implications for employees
- Developing internal communications for HR and finance teams
- Ensuring your payroll resource is trained and ready
For many businesses, this is where outsourced payroll support becomes essential.
How we support businesses through complex change
As outsourced payroll specialists, we offer strategic guidance, technical expertise, and systems that ensure your payroll process is fully compliant and future-ready.
We are already working with businesses to model the impact of mandatory BIK payrolling, review benefit structures, and build processes that will meet the 2027 standard ahead of schedule.
Don’t wait for the deadline. Plan for it
We understand that payroll is just one of many pressures on your business.
That is why we take it off your plate and give you confidence in your compliance.
To find out how we can support your payroll team and help you prepare for 2027, contact us today.