Payrolling for benefits in kind (BIKs) is changing as HMRC moves towards a fully digital, real-time approach for taxing benefits provided by employers. April 2027 is the date mandatory payrolling of benefits goes “live”.
That might seem a while away as of early 2026, but this will be a significant operational change for many employers. Preparation is therefore critical to avoid errors and problems with HMRC.
Payrolling for Benefits: Timeline
Here are the key dates employers providing benefits need to be aware of:
The "Double Tax" Concern for Employees
Historically, if an employee moves to payrolling, they might effectively pay twice in one year (once for the previous year’s benefit via their tax code, and then again via payroll for the current year. This first year impact is understandably a big concern for employees.
If this overlap causes financial problems, HMRC says underpayments can be spread over more than one tax year.
However, employers can also help by implementing via a staggered approach. In other words, you can register to payroll some benefits for the 2026/27 tax year, and then move the remainder over in 2027.
You must register on the HMRC portal on or before 5th April 2026 to do this!
New technical and operational requirements
There is a lot to think about as the go-live date approaches. Here are some of the most important technical requirements to keep in mind.
Registering correctly and on-time
Employers can register for payrolling of benefits via their Government Gateway. For Gravitate Payroll clients, we can handle this on your behalf via our portal.
Zero-pay employees
Even if an employee (or Director) has no actual pay in a month, benefits must still be submitted in real-time using the Full Payment Submission (FPS). Any tax due needs to be paid monthly or quarterly – which one will depend on your registration
Irregular pay cycles
For weekly or fortnightly payrolls, equal benefit amounts need to be processed each period, with adjustments made for "Week 53" scenarios. This happens when a payroll year has 53 weekly paydays instead of the usual 52. To remain compliant, you must ensure the full value of the benefit is spread across all 53 pay periods or adjusted in that final week.
Class 1A NICs
You still need to submit P11Db forms outside of your payroll software for now; however, this may be made digital in the future.
Communicating with your team
Your HR and finance departments might be anticipating a flood of payroll related queries when things go live and their tax positions change. This is why transparency and timeliness are so important.
Once you register for payrolling of benefits, you need to inform your employees of the following:
- They will not experience double taxation because you registered before the start of the tax year.
- Which benefits are being payrolled and which are staying under the old system for now.
- HMRC may amend employee tax codes.
- They will benefit from setting up/logging not their own Government Gateway account to keep track of their benefits and tax position.
The time to prepare is now
Moving to mandatory payrolling of benefits may cause headaches for employers that are underprepared or communicate poorly. The good news is, with the right support, you can get ahead of the curve and prepare your business the right way.
Automation-enabled cloud payroll processes are the future, and mandatory payrolling of benefits in kind is just one area where the digital route excels.
Gravitate can help you get there with time to spare – contact us today about your payroll needs.
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