Benefits in Kind are changing – what employers need to know

Benefits in Kind are Changing – What Employers Need to Know

10 August 2026

Providing employees with perks such as a company car, private medical insurance or other non-cash benefits can be a great way to reward your team. But these extras can come with tax implications – and the way they are reported to HMRC is changing.

“From 6 April 2027, the way many Benefits in Kind are reported to HMRC will begin to change significantly. Employers should start preparing their payroll systems and processes now.”

What is a Benefit in Kind?

A Benefit in Kind (BiK) is a benefit provided to an employee or director in addition to their normal salary or wages.

Common examples can include:

Company cars and fuel – Vehicles or fuel provided for private use.
Private medical insurance – Health insurance paid for by the employer.
Gym memberships – Employer-funded memberships or similar wellbeing benefits.
Other employee perks – Certain non-cash benefits provided as part of an employee’s remuneration package.

Depending on the benefit and the circumstances, it may be taxable. The employee can therefore have Income Tax to pay on its taxable value, while the employer may also have a Class 1A National Insurance liability.

Benefits in Kind can create tax liabilities for both sides.
The employee may pay Income Tax on the taxable value of the benefit, while the employer may also have National Insurance reporting and payment responsibilities.

How does it work now?

Traditionally, many taxable Benefits in Kind have been dealt with after the end of the tax year.

Employers report relevant benefits to HMRC, commonly using forms P11D and P11D(b). HMRC can then collect the employee’s tax through adjustments to their PAYE tax code.

Some employers already choose to payroll certain benefits voluntarily. In these cases, the tax due on the benefit is collected through the payroll during the tax year rather than being dealt with afterwards.

What’s changing?

From 6 April 2027, HMRC is beginning a major move towards mandatory real-time reporting of Benefits in Kind through payroll.

The first phase will cover:

Company cars
Car fuel
Vans
Van fuel
Employer-provided medical benefits

Instead of waiting until after the tax year to report these benefits, employers will generally need to calculate and report the taxable amounts through their payroll software as part of Real Time Information (RTI).

“The biggest change for employers is that Benefits in Kind will increasingly become part of the regular payroll process rather than something that is dealt with after the tax year has ended.”

What happens from April 2028?

From April 2028, mandatory payrolling is expected to extend to most other Benefits in Kind.

Employer-provided loans and accommodation are being treated separately, with mandatory payrolling for these benefits expected to be confirmed at a later date.

This is a phased change.
Company vehicles, fuel and employer-provided medical benefits are expected to move first, with most other Benefits in Kind following from April 2028.

What should employers do?

Although April 2027 may seem some way off, businesses should start reviewing the benefits they currently provide and considering whether their payroll processes and software will be ready for the new requirements.

Employers should consider:

Reviewing existing Benefits in Kind – Identify which benefits are currently being provided to employees and directors.
Checking how benefits are currently reported – Establish which benefits are dealt with through P11Ds and which, if any, are already being payrolled.
Reviewing payroll software – Make sure your current system will be able to deal with the new reporting requirements.
Checking employee information – Ensure records relating to company cars, medical insurance and other benefits are accurate and kept up to date.
Preparing payroll processes – Consider who will be responsible for calculating, reporting and updating Benefits in Kind.
Communicating with employees – Employees may see changes to their payslips or PAYE deductions when benefits begin to be reported through payroll.

Why getting it right matters

Benefits in Kind can sometimes be overlooked because they are not paid as cash through the normal payroll.

However, incorrect treatment can result in:

Unexpected Income Tax liabilities for employees.
Incorrect PAYE deductions.
Additional National Insurance liabilities for the employer.
Errors in P11D or payroll reporting.
Additional administration when mistakes need to be corrected.

Preparing early gives employers more time to identify any gaps in their current processes and make sure payroll systems are capable of dealing with the new rules.

Do not leave the changes until April 2027.
Reviewing your employee benefits and payroll processes in advance gives you time to resolve any issues before mandatory payrolling begins.

Speak to Evans Entwistle

The move towards mandatory payrolling of Benefits in Kind will represent a significant change for many employers.

Understanding which benefits are affected, how taxable values should be calculated and how the information needs to flow through payroll will be important in avoiding unexpected tax bills, incorrect deductions and unnecessary administration.

At Evans Entwistle, we can help you review the Benefits in Kind you currently provide, understand how the new rules may affect your business and prepare your payroll processes for the changes ahead.

Need help understanding Benefits in Kind or preparing your payroll for the new rules? Talk to the team at Evans Entwistle and we’ll help you get ready.