Adapting to Mandatory Payrolling of Benefits in Kind
4 February 2024
In April 2026, businesses will experience a significant shift in managing payroll benefits in kind (BIK). This change, recently mandated by HMRC, is set to streamline the process, making it more efficient and less cumbersome. Let’s get started on what these changes mean for you and your business…
What’s changing with payroll benefits in kind?
The change revolves around the mandatory reporting and payment of Income Tax and Class 1A National Insurance for benefits in kind (BIK) directly through your payroll system.
This move is part of HMRC’s broader effort to digitise and simplify tax reporting. It’s designed to make life easier for employers by reducing the paperwork and administrative tasks associated with managing employee benefits.
What is payrolling benefits in kind (PBIK)?
Introduced voluntarily in April 2016, PBIK allows for the real-time reporting of employee perks, such as company cars or health insurance. Until now, this has been an optional practice, but from April 2026, it will become a standard requirement.
Current challenges and future solutions
Currently, the system doesn’t support real-time reporting for Class 1A National Insurance associated with these benefits. This gap necessitates additional paperwork via the P11D(b) form. However, the new mandatory system will encompass this, thereby eliminating the need for the P11D(b) form, unless certain benefits remain excluded from this reporting regime.
Preparing for the transition
If your business provides reportable benefits not currently under the voluntary PBIK, it’s advisable to start aligning with this system. While it’s too late for the 2023/24 tax year, there’s still an opportunity to register for the 2024/25 tax year by 5th April 2024.
Why make the shift now?
Adopting this system ahead of the mandatory deadline can reduce the burden of P11D reporting for your business. It also minimises the risk of incorrect benefit reporting once the new regulations take effect.
Support and guidance
Transitioning to a new system can be daunting, but you’re not alone. With Simon & Co’s outsourced payroll services, you can confidently embrace these changes, knowing your payroll is in expert hands!