The delay to payrolling Benefits in Kind (BIK) to 2027 might seem like a cause of relief for many businesses who are concerned about the extra responsibility the changes will bring. However, employers should still prepare for this landmark change as the deadline is unlikely to be extended again.
Rather than filing an annual P11D form, the changes to payrolling BIK will force businesses to complete additional administrative tasks every month.
What are the changes to payrolling Benefits in Kind?
The main change is the transition from an annual filing to a monthly one.
As BIK will form part of the monthly payroll, it will be subject to the same monthly tax and National Insurance contributions (NICs) as other employee expenses.
This could impact the cash flow of unprepared businesses.
The more regular payments could reduce working capital in the short term.
Over time, the smaller, more regular payments should allow for better cash flow management, as expenses associated with BIK can be managed throughout the year.
Be aware that even with this change, there is still a need to produce an annual summary of BIK, which must be provided to employees by 1 June.
This dual reporting increases the administrative load for businesses, who will have to endure monthly filings, as well as the compilation of an annual report.
How to prepare for the changes to Benefits in Kind
Updating your benefits policy early is advisable, so that you can address any issues before the deadline.
While payrolling BIK is still voluntary, it may be worth considering becoming an early adopter so that you can adjust your business operations and ensure compliance before the 2027 deadline.
Getting used to the additional burden of having to incorporate BIK into your monthly payroll may take some time, so give yourself the opportunity to perfect the system before there is a threat of penalties.
If you begin to track benefits monthly it can lay the groundwork for transitioning to payrolling BIK and help you file your final form P11D in 2026, making the annual report easier to compile.
Businesses payrolling BIK for the first time will need to register with HMRC online before the start of the tax year they want to payroll benefits for.
Please note that BIK relating to living accommodation and beneficial loans cannot be payrolled. Those benefits will still need to be reported to HMRC on an electronic P11d form.
If you already payroll BIK, do not forget to re-register before 5 April 2027, as failure to do so will cause you to be noncompliant.
Take the time to get ready for payrolling Benefits in Kind. Speak to us today.
