Payrolling Benefits in Kind from 6 April 2026

The Government confirmed in the Budget that the mandatory payrolling of benefits in kind will apply from 6 April 2026. This will include:

"the reporting of Income Tax and Class 1A National Insurance Contributions (NICs) for most benefits in kind (BiKs) in real time. This will mean that for most?BiKs, Income Tax and Class 1A?NICs?will need to be reported to?HMRC?via?PAYE?through Real Time Information (RTI) from April 2026. Employment related loans and accommodation will be mandated to be reported in this way at a later date, however, employers will be given the opportunity to be able to voluntary payroll the?BiKs?from April 2026.

The reporting process for BiKs will be through the Full Payment Submission (FPS). This is the same process employers currently use to report salary and other employee details to HMRC".??

The published policy document acknowledges the valuable feedback from the ICAEW and CIOT and explains that:

"we have made amendments as to how mandatory payrolling of BiKs will be taken forward.?

The main changes are:?

• the delivery of the work to mandate the real time reporting of and payment of tax on BiKs will be phased in from April 2026 – this will mean that all BiKs, with the exception of employment related loans and accommodation, will be mandated to be reported via payroll from April 2026
• voluntary payrolling will be introduced for employment related loans and accommodation from April 2026. The P11D and P11D(b) process will still be available for those that do not want to payroll these BiKs. The government intends to mandate these BiKs and will set out a timeline in due course
• an end of year process will be introduced to amend the taxable values of any BiKs that cannot be determined during the tax year.?However, we expect the taxable values of most BiKs to be reported as accurately as possible during the tax year
• we will continue to monitor the penalty position, from April 2026 to April 2027, whilst customers get used to the new process of reporting BiKs to HMRC. We recognise that there will inevitably be a period of adjustment in the first year"

The process will be similar to that for the current voluntary payrolling of benefits in kind. The policy document saying:

"Employers will need to divide the cash equivalent of the BIKs they will be providing across the number of relevant pay periods for each employee. The resulting figure can then be reported alongside employee earnings in each pay period so that Income Tax due on the benefit is deducted from the employee’s pay on their payslip.

If a change to the cash equivalent occurs in year, the employer must work out the revised taxable amount to payroll for the remaining pay periods for that tax year".

If an employer finds a discrepancy in a benefit in kind in year, the discrepancy should be amended in the remaining PAYE submissions (FPS). A new end of year process will be introduced to deal with amendments to benefits in kind values after the year end. Further details on this and on the the extra reporting requirements in year will be published at a later date. The policy document explains that:

"We are expecting to require more data to be reported than is currently required through the voluntary system, both to reflect the introduction of Class 1A NICs on BiKs reporting in the payroll system and to provide a more granular breakdown of the BiKs being reported through payroll.

This policy will:

• enable a more accurate assessment of tax liability
• support compliance activity with a substantially larger population reporting BiKs through payroll
• enable employers to better communicate with their employees, about their total remuneration package

We will publish technical specifications for software developers and providers during mid to late 2025 which will detail precisely which additional data items will be added to RTI".

Late 2025 doesn't leave very much time for software developers to implement, test and release the changes. Employers, Software developers and Agents will need to keep a close eye on these developments so that they can ensure that the all the information required can be obtained from third party suppliers on a timely basis for each payroll cycle.