Government Delays Mandatory Payrolling for Benefits in Kind to April 2027
Employers and payroll professionals granted extra year to prepare for major tax reporting change
The government has officially delayed the introduction of mandatory payrolling for benefits in kind (BiKs) to 6 April 2027, providing stakeholders with an additional year to prepare.
Originally scheduled for April 2026, the policy will require Income Tax and Class 1A National Insurance Contributions (NICs) on taxable benefits and expenses to be reported and processed directly through payroll software. The change aims to modernise and simplify the tax system, reducing the administrative burden of annual P11D forms. However, certain benefits, such as employment-related loans and accommodation, will require separate registration and may still necessitate P11D reporting if not payrolled.
A technical note published by HMRC confirmed the revised implementation date, citing feedback from software developers, employers, tax agents, and industry representatives. Many had raised concerns about the complexity of the transition and the time required to adapt systems and processes.
“This extra year offers vital breathing space for everyone involved—from employers and payroll teams to software providers and tax professionals,” said a spokesperson for the Chartered Institute of Payroll Professionals (CIPP).
The government’s announcement also included operational details to help businesses prepare. These cover the scope of reportable benefits, integration with payroll software, and upcoming compliance requirements.
Key Points:
New go-live date: 6 April 2027
Who’s affected: Employers offering taxable benefits (e.g., company cars, private medical insurance, etc.)
What's changing: All BiKs and related Income Tax/Class 1A NICs must be processed in real-time through payroll
Reason for delay: To allow sufficient time for systems development and stakeholder readiness
Employers are encouraged to begin reviewing their benefits reporting processes now and engage with their software providers to ensure compatibility ahead of the 2027 deadline.
Source: Gov.uk
