From April 2027, it will become mandatory for employers to include most benefits in kind (BiKs) provided to employees within their payroll.

All BiKs will need to be payrolled, with the exception of employer-provided living accommodation and interest-free and low-interest (beneficial) loans. These two benefits may still be payrolled, but only on a voluntary basis.

Preparing early will help to ensure a smooth transition to the new requirements, with minimal disruption, cost and impact on employees. Employers are also reminded not to underestimate the amount of time required to ensure payroll systems and processes are sufficiently robust to manage the real-time reporting of BiKs.

We can support you with the move to payrolling BiKs; however, it is essential that employees are informed about the changes to how their benefits will be taxed from April 2027. Early communication will be crucial in helping them understand the potential impact on their tax codes and take-home pay.

In particular, it is important to explain that:

  • Employees who are currently paying tax in arrears on their BiKs will no longer do so from April 2027. Many employees may be unaware that this is how they have been paying tax on their BiKs and will instead pay tax on them in the year they are received.

  • Employees may currently have a deduction in their tax code to collect tax on an estimated BiK. This will no longer apply from April 2027.

  • Tax on BiKs will be payable in real time, in the year the benefit is received.

Where an employee is also paying tax on a BiK provided in a previous year, from April 2027 it may appear that they are being taxed twice on the same benefit. It may be necessary to explain that they are paying tax in real time on the BiKs received in that year, while also settling the outstanding tax due on BiKs from previous years.

If the move to payrolling BiKs will affect you or your employees, please speak to us. We will be happy to assist you with the transition to the new process.