Mandatory Benefits in Kind (BIK) – Update

HMRC has confirmed that the move to mandatory payrolling of Benefits in Kind (BIKs), due to begin in April 2027, will now be introduced in a phased approach.

This is a welcome update, giving employers and payroll providers more time to prepare for what is a significant change.

What’s happening first (from April 2027)

The first phase will focus on the most common Benefits in Kind:

• Company cars and fuel
• Vans and van fuel
• Private medical insurance

These are benefits that many employers are already familiar with, and in many cases have been voluntarily payrolled for some time. As such, this initial phase should be more manageable for most organisations.

All other benefits will continue to be reported via P11D, unless you have already registered for voluntary payrolling.

What comes next (likely from April 2028)

The second phase is expected to bring the remaining benefits into mandatory payrolling, including:

• Assets transferred
• Vouchers and credit tokens
• Living accommodation
• Beneficial loans
• Relocation expenses above the exempt limit
• Services (including accountancy fees)
• Other miscellaneous benefits

Some of the more complex benefits, such as accommodation and loans, may follow slightly later.

Why the change in approach?

Following feedback from employers and payroll providers, there were concerns about whether payroll systems were ready to handle the full range of benefits from day one.

As a result, HMRC has taken a more practical approach by staggering the rollout. This should reduce pressure on payroll processors and give software providers more time to adapt.

More detailed technical guidance is expected in the coming weeks.

What you should be thinking about now

April 2027 will come round quickly and it’s worth starting preparations now by:

• Reviewing how you handle company cars, vans, and private medical insurance
• Checking your payroll system/provider can support payrolling these benefits
• Making sure your data is accurate and complete for real-time reporting

If you need support

If you’d like support getting ready for mandatory payrolling, or want to sense-check your current processes, feel free to get in touch with our team on 0330 024 0888 or email enquiry@larking-gowen.co.uk.

Dannielle Chapman