Benefits in kind: mandatory payrolling will be phased

The full rollout of mandatory payrolling for benefits in kind has been delayed by HMRC.

It has confirmed that mandatory real-time reporting of income tax and Class 1A National Insurance contributions (NICs) for certain benefits in kind and taxable expenses will now be phased in from April 6, 2027, rather than rolled out in a single start date as originally planned.

The first phase of that rollout will now only cover motoring expenses and medical benefits, with 94 categories removed from the initial list.

All other benefits, excluding loans and accommodation, will be payrolled from 6 April 2028.

And the payrolling of loans and accommodation will remain voluntary until further notice.

Benefits in kind (BiKs) are goods and services that are provided by companies to an employee for free or at greatly reduced cost.

The introduction of mandatory payrolling for BiKs is all part of HMRC’s plan to simplify and modernise the UK tax system.

Both income tax and NIC will be collected via pay as you earn (PAYE) real time information (RTI).

Employers will not be required to complete forms P11D where the benefits provided are within scope of mandatory payrolling of BIK as the reporting and payment of the tax and NIC due will be done on a real time basis.

Further guidance from HMRC on how class 1A NIC will be calculated and reported in real time is expected in the near future.

Originally announced as a policy in 2024, the rollout has already been delayed and was originally set to come into force in April 2026.

The latest announcement that the rollout will be phased is a welcome development, with concerns having being raised about the original timetable for implementation and the time being given for employers to prepare for the changes.

The phased approach will help employers and businesses ease into the 2027 deadline.

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