Earlier this year, HMRC announced a significant update regarding the mandatory payrolling of benefits in kind (PBIKs). Originally scheduled to take effect in April 2026, the requirement was later postponed to April 2027, which was welcomed news. However, it is still important for businesses to plan ahead and ensure you’re fully prepared for the changes, to avoid disruption to your payroll processes. You may even wish to consider early adoption of the changes, to stay ahead of the game and reduce any potential pressure and stress.
WHAT IS PAYROLLING OF BENEFITS IN KIND?
Payrolling benefits in kind (PBIKs) is a process where employers include the value of certain benefits provided to employees in their payroll. This means that the tax due on these benefits is collected in real-time through the PAYE (Pay As You Earn) system, rather than being reported separately on a P11D form at the end of the tax year.
The benefits:
- Simplified Tax Reporting: Reduces the administrative burden of completing P11D forms.
- Real-Time Tax Collection: Ensures that employees pay the correct amount of tax on their benefits throughout the year.
- Transparency: Provides employees with a clearer understanding of their total taxable income.
The postponement to April 2027 provides employers with an extended period to adjust their systems and processes to comply with the new regulations. This offers a valuable opportunity for employers to ensure a smooth transition and to address any potential challenges well in advance of the new deadline.
However, for those who wish to proactively implement payrolling of benefits ahead of the mandatory deadline, it is essential to have the necessary processes in place by April 5, 2026, to start payrolling benefits for the 2026/27 tax year.
PREPARING FOR EARLY ADOPTION
If you are considering early adoption of payrolling benefits, it is advisable to begin preparations as soon as possible. Here are some steps to get started:
- Review Current Benefits: Identify which benefits can be payrolled and assess their current reporting methods.
- Update Payroll Systems: Ensure your payroll software is capable of handling payrolled benefits.
- Employee Communication: Inform your employees about the changes and how it will affect their pay and tax.
- Training: It is vital to provide thorough training for your payroll team to manage the new processes effectively. Or you may wish to consider outsourcing your payroll to ensure compliance and provide the reassurance that all changes will be handled for you, freeing up time for you to focus on your business.
SUMMARY
The delay in the mandatory payrolling of benefits in kind to April 2027 is a welcome move for many employers, however early adoption may well be worth considering to ensure you’re fully prepared ahead of the mandatory deadline. By taking proactive steps now, you can ensure a seamless transition and avoid any last-minute challenges. If you have any questions or would like assistance with implementing payrolling of benefits in kind, our payroll department is here to help. Get in touch today by clicking the button below.
