Reporting on benefits in kind and expenses

As part of HMRC’s push towards digitalisation and real-time tax reporting, the government is mandating the payrolling of certain benefits in kind (BIKs) through employer payroll software starting in April 2026, but the 2024 to 2025 tax year is critical for preparation. From April 2026, all BIKs will need to be reported in real time through payroll. The aim is to reduce the administrative burden of P11Ds and ensure accurate, timely tax collection.

Action Steps for 2024 to 2025:

  • Review benefit offerings: Categorise which benefits are suitable for payrolling.

  • Register for voluntary payrolling (via HMRC’s online service) before 5 April 2025 if planning to start in 2025–2026.

  • Ensure payroll software compatibility: Most modern systems like Sage, Xero, or IRIS support payrolled benefits.

  • Update internal processes and policies: Adjust HR, payroll, and finance procedures accordingly.

  • Train payroll staff: Especially in handling gross-up calculations, coding benefits, and compliance.

WWLD?

Employers can prepare now by doing the following:

  • Ensuring payroll software supports benefit reporting

  • Reviewing all employee benefits and identifying those to be payrolled

  • Communicating with employees about changes to payslip presentations and tax implications

For more information, you can access the full bulletin here.

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