There’s an important update on the horizon that employers and payroll teams will want firmly on their radar… and yes, it’s one of those “this will change how things are done” moments 👀 

🧾 What’s changing? 

Mandatory payrolling of Benefits in Kind (BiKs) and taxable employment expenses is now set to come into force from 6 April 2027. 

In simple terms, this means: 

• Most BiKs will be processed through payroll in real time 
• The annual P11D form will largely be phased out from the 2027–28 tax year

Originally due to take effect from April 2026, mandatory payrolling of BiKs has now been pushed back to 6 April 2027. A welcome breather? Yes. A reason to delay preparation? Absolutely not. 

What’s Changing? 📅 

From April 2027, employers will be required to report and tax most benefits through payroll in real time, using the Full Payment Submission (FPS). In simple terms, this means: 

• The familiar P11D forms will largely be phased out 
• Income Tax and Class 1A NIC on benefits will be handled through payroll 
• Reporting will align with how salaries are currently processed

To support this shift, additional data fields will be introduced within RTI submissions to capture the detail previously reported annually. 

🔄 How will it work? 

From April 2027: 

• BiKs and expenses will be reported via the Full Payment Submission (FPS) 
• This aligns benefit reporting with how salaries are currently processed 
• Additional RTI data fields will be introduced to capture the detail previously reported on P11Ds and P11D(b)s 

There will also be some flexibility: 

• Employers can choose to payroll employment-related loans and accommodation (these won’t be mandatory initially). 

⚠️ Penalties (and a bit of leniency) 

HMRC has confirmed there will be an adjustment period: 

• No penalties for inaccuracies in 2027–28 (as long as there’s no deliberate non-compliance) 
• However, late filing and late payment penalties will still apply, along with interest. 

💻 Software updates 

HMRC’s Basic PAYE Tools will be updated to support the new requirements, so even smaller employers using HMRC systems should be covered. 

🔍 Perrigo Perspective 

This is one of the most significant payroll changes we’ve seen in recent years – not just a tweak, but a shift in how benefits are reported entirely. 

While the delay to 2027 gives more time, it would be a mistake to treat this as “future problem territory.”  

Moving BiKs into payroll means: 

• Reviewing payroll systems and software capability 
• Ensuring accurate, timely data collection for benefits 
• Training teams to manage reporting in real time rather than annually

For many businesses, especially those with complex benefits packages, this will require process changes, not just system updates. 

The upside? 
Done well, this could streamline reporting and reduce the year-end administrative burden. But getting there will take planning. 

Internet Link – Mandatory payrolling of benefits in kind and expenses – interim guidance and legislation – Getting ready for mandatory payrolling of benefits in kind – Guidance – GOV.UK

If you’d like to talk through how this might affect your business or what steps to take next, we’re here to help.