October 15, 2026
LR Knowledge Article | October 2026
From 6 April 2027, UK employers will need to change the way they report and tax certain employee benefits. What has traditionally been an annual compliance exercise through Forms P11D and P11D(b) is set to become part of the payroll process, with reporting and taxation taking place throughout the year.
For many businesses, this represents one of the most significant payroll compliance changes in recent years.
While April 2027 may seem some time away, employers should already be considering how these changes could affect their payroll processes, benefit administration, employee communications, and compliance obligations.
The Government plans to introduce mandatory payrolling of certain Benefits in Kind (BiKs), bringing them into Real Time Information (RTI) reporting through payroll software. Rather than reporting benefits after the end of the tax year and collecting tax through later tax code adjustments, tax will generally be reported and collected in real time.
Mandatory payrolling is planned to apply to:
Employers will be required to calculate and report the associated Income Tax and Class 1A National Insurance contributions through payroll.
The current proposals indicate that mandatory payrolling will then extend to most other Benefits in Kind. Employer-provided loans and accommodation are currently excluded from the announced mandatory phases, pending further Government confirmation.
For many organisations, the challenge is not understanding the legislation. The challenge is ensuring accurate benefit information reaches payroll at the right time.
Businesses often record benefits across multiple systems, including:
The move to real-time reporting means employers may need to review how information flows between these systems and who is responsible for maintaining accurate records throughout the tax year.
Questions we are already discussing with employers include:
Businesses that prepare early are likely to experience a smoother transition than those waiting until the last minute.
Employees may see changes in how tax on benefits is collected. Instead of relying on annual reporting and subsequent tax code adjustments, tax on in-scope benefits will generally be processed through payroll in real time. HMRC’s objective is to improve the accuracy of tax collected during the year and reduce retrospective adjustments.
Although the financial impact will vary depending on individual circumstances, employers should expect questions from employees and should plan communications well in advance of implementation.
Although the new rules are not due to take effect until April 2027, now is the ideal time to begin planning.
We recommend employers:
✓ Review all Benefits in Kind currently provided to employees.
✓ Identify which benefits are likely to fall within the first mandatory phase.
✓ Confirm whether payroll providers and software developers are preparing for the new requirements.
✓ Review current processes for collecting, checking and reporting benefit information.
✓ Consider how employee communications will be handled.
✓ Seek professional advice where changes to payroll procedures may be required.
Acting now can help avoid unnecessary compliance issues and operational disruption closer to implementation.
Keeping up with payroll legislation is challenging enough without having to redesign internal processes at the same time.
Our CIPP-qualified payroll team works with businesses across a wide range of sectors, helping them remain compliant while reducing the administrative burden of payroll and employment tax obligations.
We can help with:
Whether you currently run payroll in-house or outsource part of the process, we can help you assess how these changes may affect your business and identify any actions needed before implementation.
The introduction of mandatory payrolling of Benefits in Kind represents a significant shift in payroll administration. Businesses that start preparing now will be in a far stronger position when the new requirements take effect.
If you would like to discuss how these changes may impact your organisation, or learn more about Lakin Rose’s payroll services, our team would be pleased to help.
Contact Lakin Rose today for a no-obligation discussion with one of our payroll specialists.
This article is intended for general information purposes only and does not constitute legal, tax, payroll or professional advice. The Government has published draft legislation and HMRC has issued interim guidance concerning mandatory payrolling of Benefits in Kind from April 2027. The detailed rules, operational requirements and implementation arrangements remain subject to further legislation and HMRC guidance and may change before implementation. Employers should seek specific professional advice based on their individual circumstances before taking any action.
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