Businesses have been given more time to prepare for one of the biggest changes to payroll reporting in recent years.
Following feedback from employers, payroll professionals and software developers, the government has confirmed a revised timetable for the introduction of mandatory payrolling of Benefits in Kind (BiKs). Rather than requiring all taxable benefits to be processed through payroll at once, the changes will now be introduced in phases, giving organisations additional time to adapt their payroll processes.
What is changing?
For many years, employers have had the option of payrolling certain employee benefits instead of reporting them through annual P11D forms. The government’s long-term aim is to make payrolling the standard method for reporting most taxable benefits, allowing Income Tax to be collected throughout the year rather than through adjustments to employees’ tax codes.
Under the revised plans:
- From 6 April 2027, mandatory payrolling will apply to commonly provided benefits, including company cars, vans, fuel benefits and private medical insurance.
- From 6 April 2028, most remaining Benefits in Kind are expected to move into mandatory payrolling.
- Employment-related loans and living accommodation will continue to be excluded from mandatory payrolling for the foreseeable future and will remain voluntary.
Why has the timetable changed?
The original proposals attracted significant feedback from employers and the payroll profession.
Many organisations highlighted the practical challenges of moving every benefit into payroll immediately, particularly where benefit values are not available until after the payroll has been processed or where information is supplied by third parties.
The revised phased approach recognises these operational challenges while allowing employers to begin with benefits that are generally easier to calculate throughout the tax year. The government has also simplified some of the reporting requirements that employers will need to meet.
What should employers be doing now?
Although the revised timetable provides additional breathing space, businesses should not treat this as a reason to delay planning.
Preparing for mandatory payrolling often involves reviewing:
- payroll software capabilities
- employee benefit arrangements
- HR and payroll processes
- data flows between payroll, HR and finance teams
- internal procedures for recording benefits accurately throughout the year.
Starting preparations early reduces the risk of last-minute disruption and allows any process changes to be introduced gradually.
Why payroll outsourcing can help
Keeping up with changing payroll legislation is becoming increasingly complex. Mandatory payrolling is just one example of how payroll compliance continues to evolve. Rather than investing significant internal time in understanding new reporting requirements, many employers choose to work with payroll specialists who monitor legislative changes and implement them on their behalf.
If you’re considering outsourcing your payroll, now is an ideal time to speak to a specialist. Expert support can help ensure your payroll remains compliant while freeing your team to focus on running the business, rather than keeping up with ever-changing legislation. Get a quote today!