Mandatory Payrolling of Benefits Delayed to April 2027: What Employers Need to Know
- Vanessa Aradia
- May 7
- 2 min read
The UK Government has confirmed a major update that will affect employers and payroll providers across the country: mandatory payrolling of most Benefits in Kind (BiKs) will now begin from 6 April 2027, instead of April 2026 as originally proposed.
This update, published via HMRC and recently shared by the Chartered Institute of Payroll Professionals (CIPP), offers employers more time to prepare—but it also signals a clear direction of travel for payroll compliance and real-time reporting in the UK.
What Is Payrolling of Benefits?
Payrolling of benefits allows employers to process taxable benefits (like company cars or private medical insurance) directly through payroll, collecting the right amount of tax in real time rather than via the employee’s tax code after the end of the year.
Although voluntary payrolling has been permitted for several years, this change will make the process mandatory for most BiKs.
Key Highlights of the Announcement
New Implementation Date: Mandatory payrolling of most BiKs will now apply from 6 April 2027.
Scope: The mandate will cover most benefits, with employment-related loans and accommodation being excluded until further notice.
Voluntary Payrolling Still Allowed: Employers can continue to payroll benefits voluntarily in the meantime, and HMRC actively encourages this.
Reporting Method: Benefits will be reported through the Full Payment Submission (FPS) within payroll software—integrating BiKs into regular pay cycles.
What This Means for Employers
While the delay offers some breathing room, it’s crucial not to become complacent. Employers should use this additional year to:
Review their existing payroll software to ensure it’s capable of reporting BiKs through FPS.
Provide training for payroll and HR teams on how to manage and communicate the changes effectively.
Consider voluntary payrolling now to smooth the eventual transition and reduce the burden of P11D reporting.
Why It Matters
This shift represents a long-term move toward real-time, transparent taxation of employment benefits. It helps employees see their tax liabilities in real time and simplifies year-end reporting for employers.
But like any systemic change, it requires careful planning, system updates, and a communication strategy to avoid disruption.
How TCW Accounting Solutions Can Help
At TCW Accounting Solutions, we’re committed to helping employers stay compliant and confident. Whether you're considering voluntary payrolling now or planning your transition for 2027, our team is here to support you every step of the way.
Get in touch with us today to schedule a consultation or to review your current payroll systems.
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