HMRC delays mandatory payrolling of benefits in kind

HMRC has announced a significant delay to the mandatory payrolling of benefits in kind (BiK), giving employers and payroll professionals a much-needed extension to prepare. 

The measure was originally set to be introduced in April 2026 and has now been delayed until April 2027. However, employers can still choose to payroll benefits in kind voluntarily before the new deadline. 

The decision comes after extensive consultation with stakeholders revealed concerns about the readiness of payroll software providers and employers to meet the initially proposed deadline. 

For those who voluntarily signed up to payroll benefits for the tax year 2025/26 before the 6 April deadline 2025, all is not lost. The government remains committed to the transitioning to real-time reporting of benefits in kind through payroll with a system designed to replace the need for annual P11D forms, streamlining the process for employers and providing greater accuracy for employee tax codes. 

To payroll benefits for the tax year 2026/27, the deadline to do so is 6 April 2026. 

HMRC has said it will work closely with software developers and employers throughout the extended implementation period to ensure a smooth transition when the mandatory requirements do come into effect. 

Employers who have not yet registered for voluntary payrolling are encouraged to consider adopting the system ahead of the mandatory requirements, allowing them to identify and address any challenges well before the new deadline. 

There are good reasons for employers to do so, including:

• The need to no longer submit P11D and P46 (car) forms to HMRC. 
• After implementation, receiving fewer HR queries from employees due to simpler tax codes. 
• Tax deductions in monthly payroll being more accurate. 
• Tax codes for individuals should change less frequently. 
• Fewer forms for employers to complete at year-end.

We provide comprehensive payroll services, helping businesses navigate legislative changes, ensure compliance, and streamline payroll processes. For more information about HMRC’s delay to mandatory payrolling of benefits in kind and how it may affect your business, please contact Jack Dale, in our payroll team.