From April 2027, all UK employers will be required to payroll Benefits in Kind (BiKs) rather than report them via the traditional P11D process. While it might seem like a distant change, businesses should begin preparing now, ahead of the 2026/27 transitional year, to ensure a smooth shift in how employee benefits are taxed and communicated.
Payrolling BiKs means that the value of benefits is processed through payroll and taxed in real time, rather than calculated and submitted annually via a P11D. The new rules are being introduced to streamline reporting.
Common benefits that fall into this category include private medical and dental insurance, critical illness cover, income protection and company vehicles. These will no longer be handled as separate year-end declarations but instead integrated into monthly payroll cycles.
There are clear advantages to this change for businesses. Monthly reporting allows for greater accuracy and removes the burden of the year-end P11D process. It provides employers with a clear, real-time view of which employees are receiving which benefits, improving transparency and cutting down on administrative time and costs throughout the year.
For employees, the move to payrolling BiKs also brings clarity. Benefits are visible directly on their payslips, making it easier to understand exactly what they’re receiving. Crucially, it removes the need for mid-year tax code changes, which can be confusing and often lead to uncertainty around take-home pay.
The change also reduces the risk of errors. Under the current P11D system, HMRC may use estimates from previous years to adjust tax codes in advance, which can result in overpayments or underpayments of tax. With real-time payrolling, employers report actual figures each month, making it less likely that mistakes will occur and reducing the need for retrospective corrections.
What employers need to do now
This change will impact any company with staff on its payroll. offering a range of staff benefits, and those with a number of employees receiving taxable benefits. The earlier these businesses begin reviewing their current BiK offering, the better. It’s a chance to assess whether all existing benefits are still relevant or cost-effective and whether new options should be introduced.
One of the biggest shifts for employers is that this new method reports benefits in real time, not retrospectively. This has a direct impact on employees' net pay. During the transitional period, employees may be affected by a "double hit", paying tax monthly on new BiK values while still receiving a P11D for the previous year. It’s crucial to communicate these changes well in advance and offer the option to opt out of all or certain benefits if appropriate.
Businesses will also need to liaise closely with their payroll provider to confirm how BiKs will be processed, what additional data is needed, and whether any system changes are required. While registration for payroll was previously optional, the upcoming changes mean it will soon become the default method, so don’t assume everything will happen automatically.
A common error during implementation is the incorrect calculation of the taxable benefit. It’s not always just the cost to the business. For example, if an employee has a salary sacrifice arrangement, the value that should be payrolled might be higher than the actual outlay. Failing to get this right can lead to confusion and underpayment of tax.
This is where clear communication becomes vital. Employees will notice changes in their payslip, and they’ll have questions. Being able to explain what’s changing, why it matters, and how it affects them will make the process much smoother.
How Hayward Wright can support your business
At Hayward Wright, we’re already helping clients prepare for this change. Whether you’re currently submitting P11Ds through us or not, we can help you understand the steps you need to take now before the April 2027 deadline. While many providers will simply process the data, we work with businesses to ensure their employees are supported too.
Our biggest piece of advice? Don’t leave it until the last minute. Start now, have the internal conversations, speak to your payroll provider, and engage your employees. That way, when the change arrives, it won’t feel like a disruption, it’ll feel like a natural evolution.
If you’d like to talk through what these changes mean for your business, the Hayward Wright team is here to help.