From P11Ds to PAYE: Get Ready for Mandatory Payrolling of Benefits

Earlier this year, the UK government postponed plans to mandate the payrolling of Benefits-in-Kind (BIKs) to April 2027. The move is set to simplify tax reporting but also shift more administrative responsibility onto employers.

What Is Payrolling of BIKs?

Currently, many employers report BIKs via P11Ds at year-end. Payrolling allows BIKs (like company cars or medical insurance) to be taxed monthly via PAYE, improving transparency for employees and reducing year-end admin.

What’s Changing?

From April 2026, all employers will be required to payroll most benefits, removing the P11D route for many items. This means more accurate real-time tax and NI payments, but also tighter data management.

What Employers Should Do Now:

• Audit Your Benefits: Understand what BIKs you currently offer and how they’re processed.

• Review Systems: Ensure your payroll software supports payrolling and accurate real-time reporting.

• Update Processes: Prepare for earlier reporting timelines and ensure HR/payroll teams are trained.

• Communicate with Employees: Help them understand changes to payslips and tax treatment.

DCG can help you get ahead now by giving you time to review systems and iron out issues before the mandate takes effect. Early adoption may also streamline your audit process and improve employee trust in their tax deductions.