(Or: The Wonderful World Where Perks Meet Tax… Yay.)
Benefits in kind — or BiKs, as HMRC calls them when they want to sound cool — are one of those payroll topics that seem glamorous.
Company cars! Private medical! Gym memberships!
But behind every shiny perk lies a spreadsheet whispering,
“Someone needs to tax this…”
Let’s break down exactly how benefits in kind work, especially now that payrolling benefits is becoming the new normal.
🎀 First Things First: What Are Benefits in Kind?
Benefits in kind are non-cash perks your employees receive that still have value.
Things like:
- Company cars
- Private health insurance
- Interest-free loans
- Gym memberships
- Vouchers
- Accommodation (the drama-filled one)
If it benefits the employee and isn’t salary?
Congratulations — it’s a BiK, and HMRC wants a word.
🔄 What Does “Payrolling Benefits” Actually Mean?
Payrolling benefits is simply this:
👉 Instead of reporting benefits at the end of the year on P11D forms, you tax them through the payroll in real time.
It’s becoming the UK’s new standard approach — and honestly, once you get used to it, it’s a lot smoother.
Here’s how it works:
📌 1. The cash equivalent of the benefit is added to the employee’s taxable pay
Not physically paid — just added for tax purposes.
Payroll applies Income Tax via PAYE each pay period.
📌 2. No P11D forms (for those specific benefits)
If a benefit is payrolled, you usually don’t need to submit a P11D for it.
Employees everywhere cheer.
📌 3. BUT: Class 1A NIC still applies
You must still:
- Calculate Class 1A NIC
- Submit form P11D(b)
- Pay Class 1A NIC annually
Because HMRC never misses a chance to add a form.
📌 4. You must tell your employees in writing
You need to let employees know you’re payrolling their benefits — so when they see new figures on their payslip, they don’t think you’ve suddenly given them a pay rise.
And yes — payrolled benefits values appear on their P60, too.
📅 Mandatory Payrolling Is Coming
(Grab your diary, and maybe a biscuit.)
This is the big one:
💥 From April 2027, payrolling benefits becomes MANDATORY for most benefits.
It was originally set for April 2026, but the government kindly said:
“Actually, no. Let’s give everyone a breather.”
You’re welcome, payroll world.
What’s the situation now?
✔ NOW (Voluntary):
You can payroll most benefits — except:
- Living accommodation
- Beneficial loans
These still need P11Ds… for now.
✔ FROM APRIL 2027 (Mandatory):
Most benefits must be payrolled.
The government will release full details in 2025.
Even loans and accommodation benefits are expected to be included — either in the main scheme or a separate registration process.
Brace yourselves.
🧾 Why Employers Actually LIKE Payrolling (Surprisingly)
- Less admin: No more end-of-year P11D chaos.
- Fewer employee queries: When tax is handled monthly, there are no “why is my tax code weird?” emails.
- Improved accuracy: Real-time tax means fewer mistakes.
- Happier employees: No surprise tax bills in July.
It’s one of the few payroll changes that actually makes life easier.
🖥️ Registering to Payroll Benefits
If you want to start payrolling benefits before 2027, you must register with HMRC before the start of the tax year.
Example:
To payroll benefits in the 2025/26 tax year, the deadline was 5 April 2025.
You can register using HMRC’s online system.
Nice and simple — for once.
❤️ The Love Payroll Bit
At Love Payroll, we handle:
✔ Registration with HMRC
✔ Setting up benefits in your payroll software
✔ Monthly payrolling of benefits
✔ Class 1A NIC calculations
✔ P11D(b) submissions
✔ Employee communication (so no one panics at their payslip)
We take the stress out of the process so your perks stay perks — and don’t turn into tax-shaped nightmares.
Because benefits should feel like a treat… not a compliance drama.
