From April 2027, employers will be required to payroll most benefits in kind (BiKs). This means the tax due on these benefits will be collected through payroll, rather than later via employees’ tax codes or Self Assessment.

Which benefits are included? 

Almost all BiKs will need to be payrolled. The only exceptions are:

• Employer-provided living accommodation
• Interest-free or low-interest (beneficial) loans

These two benefits can still be payrolled, but this will be optional, not mandatory.

Why preparation matters

Moving to payrolling BiKs will take planning. Employers shouldn’t underestimate the time needed to:

• Update payroll systems
• Test processes
• Ensure accurate, real-time reporting of benefits

Starting early will help reduce disruption, extra costs, and confusion for employees.

Communicating with employees is key

We can support you with the move to payrolling BiKs, but it’s essential that employees understand what’s changing and how it may affect them from April 2027 – particularly their tax codes and take-home pay.

It’s important to explain that:

• Tax will no longer be paid in arrears on BiKs. From April 2027, employees will pay tax on benefits in the year they receive them, even if they weren’t aware they were previously paying tax later.
• Any BiK-related deductions currently built into tax codes (based on estimated values) will be removed.
• Tax on BiKs will be collected in real time through payroll.

Why it might feel confusing at first

In some cases, employees may appear to be paying tax twice in 2027. This usually happens where they are paying real-time tax on BiKs received in 2027, and they are still settling tax due on BiKs from previous years.

Clear communication will help employees understand that this is a timing issue, not double taxation.

Need support?

If payrolling benefits in kind will affect your business and employees, please get in touch. We’ll be happy to help you move to the new process smoothly and with minimal disruption.