Do you currently payroll your benefits-in-kind (BIK)? HMRC has announced that payrolling benefits, and paying class 1A NIC on benefits-in-kind (BIK) via payroll, will be mandatory from April 2026.
This will reduce administrative burdens by simplifying and digitising reporting and paying tax on all employment benefits. It is part of the government’s drive to modernise the tax system. Mandation will simplify the tax affairs of 3 million people and reduce the need for them to contact HMRC. The current system is complex and confusing, so simplification is welcome. EBCam understand that draft legislation will be published later this year as part of the usual tax legislation process.
However there are complexities in payrolling BIKs. There is currently a wide range of practice, with companies payrolling all, some or none of their benefits. In addition, although payrolling BIK removes the need for employers to submit forms P11D for these BIK, class 1A NIC currently still needs to be reported and paid separately to HMRC using form P11D(b). Finally, the start date of April 2026 leaves software developers little time to develop and test their systems.
HMRC plan to engage with stakeholders to discuss their proposals to inform design and delivery decisions. HMRC’s announcement can be viewed here.