Mandatory payrolling of benefits in kind (BiK) will now be phased from April 2027

Breaking news in the payroll world: HMRC has now announced a phased approach for the mandatory payrolling of benefits in kind (BiK) from April 2027.

The change follows feedback from employers, payroll software developers and representative bodies, providing more time for businesses to prepare.

What does the phased approach to mandatory payrolling of benefits in kind (BiK) mean?

The change to payrolling of benefits was initially due in April 2026, before being postponed to April 2027.

Now, it has once again been altered, taking a phased approach from 2027.

The phased approach to payrolling of benefits will take place in two parts.

First, from April 2027, the changes will only apply to:

• Company cars and fuel
• Vans and fuel
• Private medical benefits

Throughout 2027, all other BiKs will continue to be reported through P11D forms or via voluntary payrolling.

The second phase will take place from April 2028, bringing in most of the remaining benefits as mandatory.

However, do note that loans and accommodation will stay outside the mandatory regime for now and remain voluntary, with HMRC expected to confirm a timetable for them in due course.

To better understand what this news means for businesses, we spoke with David Kisiaky, Senior Manager of Product Management.

Q: What’s the impact on businesses?

“The impact of this change may require amending settings in the payroll product to ensure all the mandatory benefits are flagged to be payrolled in real time from April 2027, and not to be used for P11D after the end of the 2027/2028 tax year.

“This will require effective communication to employees and payroll functions on how taxation will be affected.”

Q: Is this change a positive or a risk?

“It’s both good and bad in terms of risks.

“The two-phase implementation allows more time for businesses and payroll software providers to address the associated complexities with the transition.

“However, there is a risk of processing a benefit that should be payrolled via P11D, and vice versa.

“This calls for payroll professionals to promote complete awareness of expectations across all relevant stakeholders.”

Q: Should businesses start preparing now?

“Yes, without a doubt.

“The idea of payrolling benefits has been around on a voluntary basis for many years now.

“There is no need to wait any longer as that will simply push the inevitable forward by just a year.

“Businesses should prepare as much as they can, as early as possible.”

Q: How will IRIS support businesses?

“As ever, IRIS will see to it that the products it supplies to customers are legislatively compliant both by April 2027 and by April 2028.”

Mandatory payrolling of benefits in kind

While the phased implementation validates a ‘wait and see’ approach that many businesses have adopted over the years, early preparation is crucial to avoid issues down the line.

For more information on the mandatory payrolling of benefits in kind, check out our previous blog, which breaks down the change in further detail.

Blog: Mandatory payrolling of benefits in kind (BiK)

Read here

Stephanie Coward

Managing Director, HCM

Stephanie Coward is Managing Director for HCM at IRIS, where she leads the strategy, innovation and growth of the organisation’s HR and payroll portfolio. She is responsible for positioning IRIS as a trusted partner to HR professionals and ensuring its solutions support the evolving needs of modern workforces.

With more than 25 years’ experience in the technology sector, Stephanie brings deep commercial and operational expertise, with a passion for improving the employee experience through technology.

Stephanie is committed to advancing IRIS’ HCM offering and helping organisations build more resilient, empowered workforces.