From April 2026, the way employers report and manage Benefits in Kind (BIKs) is changing. Under new HMRC regulations, payrolling BIKs will become mandatory, meaning employers will need to process these benefits through their payroll system instead of reporting them annually via P11D forms.
This change is designed to simplify the process for both employers and employees, ensuring that tax on benefits is deducted in real-time rather than being adjusted later through tax codes. However, businesses need to prepare now to ensure a smooth transition and avoid compliance issues.
What Are Benefits in Kind (BIKs)?
BIKs are non-cash benefits provided to employees as part of their remuneration package, including:
- Company cars and fuel
- Private medical insurance
- Gym memberships
- Loans (e.g., season ticket loans)
- Other taxable perks offered to employees
Until now, most businesses have reported these benefits via a P11D form at the end of each tax year, with tax adjustments made later via PAYE coding notices.
What’s Changing from April 2026?
Currently, businesses can voluntarily opt into payrolling BIKs—allowing them to collect tax on benefits through payroll instead of submitting P11Ds. However, from April 2026, this will become mandatory.
This means:
- P11Ds for taxable benefits will no longer be required (except for a few cases).
- Employers will need to process BIKs through payroll monthly, ensuring that tax is deducted at source in real time.
- Employees will no longer experience delayed tax adjustments, improving transparency and accuracy in tax payments.
What Employers Need to Do to Prepare?
Review Your Current BIK Reporting Process
If you’re currently reporting BIKs via P11Ds, now is the time to assess how they will be integrated into your payroll system.
Consider Voluntary Payrolling Before 2026
Employers can opt into payrolling BIKs before the mandatory deadline of April 2026. This could help smooth the transition and give time to adjust internal processes without last-minute pressures.
Update Payroll Systems & Software
Check whether your payroll software can handle BIKs and ensure that your team understands how to process them correctly each payroll cycle.
Communicate Changes to Employees
Employees may have questions about how this will affect them, especially if they are used to receiving tax adjustments later. A clear communication plan will help manage expectations and reduce confusion.
Seek Professional Guidance
This change could have wider implications for tax planning and cash flow management. Working with an experienced accountant can help ensure you remain compliant while optimising your approach.
How Plus Accounting Can Help
With April 2026 fast approaching, it’s essential for businesses to prepare now. At Plus Accounting, we can:
- Assess your current BIK reporting process and help transition to payrolling benefits.
- Ensure payroll software compliance and guide you through setup.
- Advise on tax-efficient benefit structures to optimise costs.
- Support employee communications to ensure a smooth transition.
💡 Stay ahead of the changes – Contact us to schedule a consultation to discuss how we can help your business navigate the new BIK rules!
Author: Amber Theobald, Tax Adviser, Plus Accounting
Any views or opinions represented in this blog are personal, belong solely to the blog owner and do not represent those of Plus Accounting. All content provided on this blog is for informational purposes only. The owner of this blog makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site. Please note that AI has been utilised in generating content for this blog.
Date Published: 14 March 2025