With significant changes on the horizon for how employers handle Benefits in Kind (BiKs), now is the perfect time to prepare for the upcoming shift. From 6 April 2026, the UK government will mandate the payrolling of most employee benefits in kind. However, employers have the option to voluntarily opt in early. By acting early, employers can not only streamline their processes but also get a head start in navigating the new system before it becomes compulsory.
In this post, we’ll explore what payrolling benefits in kind means, the benefits of early adoption, and key compliance requirements.
What is Payrolling Benefits in Kind (BiKs)?
“Payrolling benefits in kind” refers to the process where employers report employee benefits, such as company cars, private medical insurance, and gym memberships, directly through payroll rather than via annual forms like the P11D. The tax due on these benefits is collected in real time through the payroll each month, instead of awaiting tax code adjustments as a result of P11D submissions.
One major advantage of payrolling BiKs is that payrolled benefits do not need to be reported on the traditional P11D form—saving employers time and reducing administrative burden.
Benefits Eligible for Payrolling
Most types of benefits in kind can be included in the payrolling regime. However, there are a few notable exceptions that still require reporting on the P11D, including:
- Employer-provided living accommodation
- Beneficial (interest-free or low-interest) loans
While these two specific benefits must continue to be reported via P11D only, employers may voluntarily choose to payroll any other benefits if they wish, although it’s not mandatory.
How to Opt-In
If you’re considering adopting the new regime early, here’s what you need to know:
- Register with HMRC in advance: Employers must register for payrolling benefits in kind before the start of the tax year in which they intend to begin using it. For those opting in early, this means registering before 6 April 2025.
- Submit the P11D(b) form: Regardless of whether benefits are payrolled or reported via P11D, employers must still submit a P11D(b) summary form to HMRC. This form reports the total taxable value of all BiKs provided to employees and is used to calculate Class 1A National Insurance Contributions (NICs).
- ‘Pay Class 1A NICs: Employers must pay Class 1A NICs on the total taxable value of benefits provided. The deadline for submitting the P11D(b) form is 6 July, and the deadline for paying the Class 1A NIC due is 22nd July (19th if via post), following the end of the tax year.’
Why Opt-In Early?
While payrolling benefits in kind will not be mandatory until April 2026, early adoption in April 2025 offers several advantages:
- Simplified administration: By payrolling benefits, employers can reduce the number of P11D forms they need to prepare and file.
- Real-time tax collection: Payrolling enables employees to pay tax on benefits throughout the year at the correct value, rather than facing an unexpected tax code adjustment once P11D’s have been submitted. This can lead to improved employee satisfaction and better cash flow management for both parties.
- Early familiarity: Opting in a year early allows employers to familiarise themselves with the process before it becomes mandatory. This head start can help businesses iron out any operational issues and ensure compliance well in advance of the 2026 deadline.
By making the system more consistent and reducing the reliance on P11Ds, the government hopes that the burden of end-of-year reporting will decrease significantly. If you would like to reduce this administrative burden even further, why not outsource your payroll to us here at Payroll Junction and leave the whole process up to us? Get a quote today!