Payrolling of benefits in kind delayed until April 2027: why it still makes sense to act now

The government has confirmed that the mandatory payrolling of benefits in kind (BiKs) will now come into force from April 2027, a year later than originally planned. While this gives employers more breathing space, it is not a reason to delay preparations.

Payrolling benefits early can still bring real advantages. Here is what you need to know, and why acting now could save you time and trouble later.

What has changed?

Under the original plan, employers would have been required to payroll benefits from April 2026. HMRC has now pushed the mandatory start date back to April 2027.

Once the rules come into effect, businesses will need to report and collect income tax on employee benefits through their payroll systems. HMRC will automatically remove benefits from employees’ tax codes. This will largely eliminate the need for employers to submit end-of-year P11D forms for most benefits.

Although there is an extra year to prepare, the message from HMRC is clear. Payrolling is coming and businesses should start thinking about how they will manage the change.

Why it makes sense to prepare early

Even with the delay, there are strong reasons to act sooner rather than later. Setting up payrolling now can help you:

• Simplify your reporting by removing the need for annual P11D forms
• Make sure employees pay the correct amount of tax at the right time
• Offer employees a better experience by avoiding unexpected tax bills later
• Reduce the risk of rushing to meet compliance deadlines close to 2027

Voluntarily moving to payrolling now gives you time to adjust your systems, train your teams and communicate with employees without the pressure of an imminent deadline.

What employers need to do

If you want to start payrolling benefits before 2027, there are a few steps to follow.

First, you must register with HMRC through the Payrolling Benefits in Kind service. Registration must happen before the start of the tax year in which you want to begin payrolling.

Second, review your payroll software. Most mainstream software already offers the ability to payroll benefits, but it is important to check that your system is correctly set up for the new process.

Third, communicate clearly with employees. Staff need to understand how payrolling will affect their payslips and their tax deductions over the course of the year.

Finally, check which benefits you offer. Not all benefits can be payrolled. For example, employer-provided accommodation and interest-free or low-interest loans still need to be reported separately on a P11D form.

Getting the details right early will help you avoid errors and unexpected costs when the rules become mandatory.

How Gravita can help

At Gravita, we are already helping businesses move to payrolling at a pace that suits them. We can help you register with HMRC, review your payroll processes, and make sure everything is set up correctly. We can also help you with employee communications to make the transition as smooth as possible.

Taking action now gives you more time to get ready and puts you ahead of the curve. If you would like to discuss how we can support your business, get in touch with our team.