Payrolling benefits in kind (BiK) is a method where employers collect income tax on employee “perks” directly through your monthly payroll, rather than reporting them at year-end via a P11D form.
Earlier benefits in kind used to mean one thing. Employers provided a benefit and later reported it on a P11D form. Tax got sorted after the fact. But now real time reporting is taking over. This is particularly important for employers preparing for the 2026/27 tax year and beyond.
This guide covers everything you need to know about payrolling benefits in kind UK, including:
- What is payrolling benefits in kind?
- How do I register to payroll benefits?
- Is payrolling benefits mandatory from 2026?
- And much more…
Let’s get into it!
What Is Payrolling Benefits in Kind?
Let’s start with the basics. A benefit in kind (BiK) is something an employer provides to an employee that has a monetary value, not cash. Common examples of this can be private health insurance, company cars, fuel allowances, and gym memberships. These perks are taxable. And as a result, HMRC expects both income tax and Class 1A National Insurance contributions (NICs) to be paid on them.
Historically, this was handled through the P11D form. Employers would tot up the value of all benefits provided during the tax year and submit a P11D to HMRC after the year ended (by 6 July). Employees would then often have their tax code adjusted the following year to collect what was owed.
Well, this process definitely seems slow. Also, it often leads to employees getting “surprise” tax bills.
Payrolling benefits in kind UK is a different approach. With it, you basically skip the end-of-year forms for those specific perks. Instead, the taxable value of each benefit is added to the employee’s pay each month and taxed in real time. Just like salary.
In short, payrolling benefits in kind UK means handling BiK tax through the payroll, month by month, as you go.
Is Payrolling Benefits Mandatory From 2026?
No, payrolling benefits in kind are not mandatory from April 2026. While originally the target to start payrolling benefits in kind UK was April 2026, it has been delayed. It is now expected to become mandatory from 6 April 2027.
The delay was announced by the government to allow more preparation time for employers, software providers, and tax agents.
For the current 2026/27 tax year, payrolling remains voluntary. However, if you did not register by 5 April 2026, you cannot payroll benefits for that tax year. You must use the traditional P11D forms instead.
After 5 April 2026, HMRC will close the voluntary registration window in preparation for the mandatory system launching in April 2027.
Payrolling Benefits in Kind Registration: How Do I Register to Payroll Benefits?
To register for payroll benefits, you must use the HMRC Payrolling Benefits in Kind (PBIK) online service. You must complete this registration before the start of the tax year.
Since the deadline for the current year (5 April 2026) has passed, any new voluntary registration you complete now will only apply to the 2027/28 tax year
Steps to Register:
- Log in to your HMRC Online Services account (Government Gateway)
- Proceed to “Payrolling employees’ taxable benefits and expenses”
- Select which benefits you want to payroll
- Select which employees you want to include
- Complete the registration before 5 April of the relevant tax year
Once registered, HMRC automatically adjusts affected employees’ tax codes to remove those benefits. This is to prevent double taxation. Employers then need to communicate the change to employees clearly.
How Does Payrolling Benefits in Kind Work?
Once you are registered and set up, how does payrolling benefits in kind work in practice?
Step 1: Calculate the Annual Value
First, calculate the annual cash equivalent value of the benefit. You calculate the cash equivalent value of the benefit, as you would for a P11D.
Step 2: Divide by Pay Periods
Then you spread that value across the tax year. You divide the total annual figure by the number of pay periods in your cycle. For a monthly-paid employee, you divide by 12. For a weekly-paid employee, you divide by 52.
Step 3: Add to Taxable Pay Each Period
Each payroll run, that monthly benefit value is added to the employee’s taxable pay. PAYE tax is then calculated on the combined total. Income tax is then deducted via PAYE as normal. This is how payrolling benefits in kind UK works in practice within your payroll software.
Step 4: Adjust If Values Change
If the value of a benefit changes mid-year (for example, the employee changes their company car), you simply recalculate. Just calculate the value for the rest of the year and spread it across the remaining pay periods so the payrolling benefits in kind remain accurate.
Step 5: Year-End Requirements
Under the current 2026/27 voluntary rules, you still have a year-end task. While you avoid individual P11D forms, you must still submit a P11D(b) by 6 July 2027. You do not need to submit individual P11Ds for benefits you have payrolled. However, you must give employees a written statement showing the benefits that were payrolled.
From April 2027, the process for payrolling benefits in kind UK gets even simpler. Class 1A National Insurance is expected to be calculated and paid through payroll in real time. This will significantly reduce year-end administration. However, a final end-of-year reconciliation will still be required. This is to ensure the correct amount of National Insurance has been paid.
So while payrolling benefits in kind HMRC simplifies things, it does not remove responsibility. That is the core of how payrolling benefits in kind works.
Which Benefits Can Be Payrolled?
Most taxable benefits can be payrolled. Here is a quick overview:
| Can Be Payrolled | Cannot Be Payrolled (Currently) |
| Company cars and fuel | Employer-provided accommodation |
| Private medical insurance | Beneficial loans (low or interest-free). |
| Gym memberships | |
| Health screening | |
| Staff entertainment (taxable portion) | |
| Mobile phones (where taxable) |
Accommodation and loans remain outside mandatory payrolling for now. Employers can choose to voluntarily pay them from April 2027 if they register separately. But P11Ds for these two categories will continue as an option for the foreseeable future.
Does Payrolling Benefits in Kind Affect the Employee’s Tax Return?
Generally, yes. Payrolling benefits in kind simplifies the process. Because tax is collected in real time via PAYE, employees are less likely to have underpayments on their return. Their tax code should also be simpler, as benefits will no longer need to be coded in.
That said, employees should still check their coding notices carefully, particularly in the transition year. There may be some cases where old benefit values are still sitting in a tax code even after payrolling begins. This could cause double taxation. Any issues should be reported to HMRC directly by the employee or handled through the employer.
Payrolling Benefits in Kind Deadline: Key Dates to Know
| Date | What You Need to Do |
| 5 April 2026 | Deadline to register for voluntary payrolling in 2026/27 |
| 6 July 2026 | P11D filing deadline for 2025/26 (if not payrolling) |
| 19 July 2026 | Class 1A NICs payment deadline for 2025/26 (22 July if paying electronically) |
| November 2026 | Voluntary registration opens for loans and accommodation |
| 5 April 2027 | Deadline to voluntarily register to payroll loans and accommodation |
| 6 April 2027 | Mandatory payrolling begins for most benefits |
| 6 July 2027 | P11D/P11D(b) filing deadline for the 2026/27 tax year |
| 19 July 2027 | Class 1A NICs payment deadline for 2026/27 (22 July if paying electronically) |
Payrolling Benefits in Kind UK: Your Checklist for the 2026/27 Transition
If you want a smooth ride into the payrolling benefits in kind UK 2026/27 tax year and beyond, here is your essential checklist:
- Check your payroll software: Make sure your system can handle HMRC payrolling benefits in kind properly. It should support real-time BiK reporting.
- Talk to your benefit providers: Your insurance or car leasing companies need to be on the same page. Ask them if they can provide timely monthly values for all benefits.
- Communicate with employees: This is the most important step for morale. Sit down with your team and communicate particularly around how their payslip will change.
- Model the cash flow impact: From the 2027/28 tax year, Class 1A NICs will likely be paid monthly rather than in one big lump sum in July. This affects your business cash flow. You should start modelling these costs now so there are no surprises in your bank balance.
The Bottom Line
Payrolling benefits in kind UK is not some niche technical issue that only large corporations need to worry about. If you provide any taxable benefits to your staff, this affects you.
Use the 2026/27 tax year to get prepared. Review your benefits, talk to your payroll provider, and if you have not already, speak to your accountant.
How Accotax Can Help
If you need help with Payrolling Benefits in Kind or any other accounting service, such as bookkeeping, VAT, or year-end accounts, visit Accotax. We offer a range of packages designed to fit your unique needs!
Reach out, get an instant quote, and let us help you stay compliant!
Disclaimer: The information provided in this blog about “What Is Payrolling Benefits in Kind and How to Set It Up“, including the text and graphics, in general. It does not intend to disregard any of the professional advice.
