From April 2027 it will be mandatory for employers to include most benefits in kind (BiKs) provided to employees in their payroll.
All BiKs will need to be payrolled except employer provided living accommodation and interest free and low interest (beneficial) loans. It will be possible to payroll these two BiKs on a voluntary basis.
Early preparation can ensure a smooth transition to the new system with minimal disruption, cost, and impact on employees. Employers are also reminded not to underestimate the time it will take to ensure payroll processes are robust enough to handle real time reporting of BiKs.
We can help you with the switch to payrolling BiKs, but it’s important that your employees are made aware of the changes to how their BiKs will be taxed from April 2027. Early communication will be key to enable them to understand how this might affect their tax codes and take-home pay.
It is important that you explain that:
- employees who are currently paying tax in arrears on their BiKs will not be doing so from April 2027 onwards – many employees may not realise that this is how they were paying tax on their BiKs, and that they will be paying tax on their BiKs in the year that they receive them.
- they may currently have a deduction in their tax code so that they pay tax on an estimated BiK – this will no longer be the case from April 2027.
- tax on BiKs will have to be paid in real time in the year that they are received.
Where an employee is also paying tax on a BiK provided in a previous year, from April 2027 it might seem to them that they are paying tax twice on the BiK. You might need to explain that they will be paying tax in real time on the BiKs they receive for that year whilst also catching up with payment of tax for the BiKs from the previous years.
If the move to payrolling BiKs will affect you and your employees, please speak to us. We will be happy to help you switch to the new process.
