Guidance for Payroll for Benefits in Kind – April 2026 

From this date, all BiKs - except for employment-related loans and accommodation - will be mandated to be reported via payroll.[1] This change is set to streamline the reporting process and enhance compliance for employers across the UK.

Benefits in Kind refer to non-cash perks provided to employees, which can include a wide range of offerings such as company cars, private medical insurance, and other employee benefits.

Traditionally, tax and National Insurance Contributions (NIC) on these benefits have been calculated via P11Ds. However, from 2026, these will need to be reported and taxed through payroll.

With this new mandate it’s crucial for employers to understand which benefits fall under this category and how they will be impacted by the upcoming changes.

To effectively prepare for the upcoming changes employers should consider the following action steps:

1. Review current benefits: Conduct a thorough review of all benefits currently offered to employees. Identify which benefits will need to be included in the payroll process.
2. Engage with payroll providers: It’s advisable to consult with your payroll provider to understand how they will support your organisation in implementing these changes. They can provide valuable insights into the necessary adjustments to your payroll systems.
3. Commence training and awareness: Providing training for your HR and payroll teams on the new processes and requirements for reporting BiKs is crucial. Ensuring that your staff are well-informed about the new requirements will facilitate effective management of the transition.
4. Update payroll systems: Ensure that your payroll software is capable of handling BiKs. This may involve software updates or changes to your payroll processes.
5. Communicate with employees: Inform employees about the changes and how it will affect their pay and tax calculations. Clear communication is key to managing expectations.
6. Establish monthly reporting from providers: Request monthly reports on new joiners, leavers, and changes to employee benefits in a standardised format for payroll integration. Implement data accuracy checks and hold regular meetings to address any issues or updates.
7. Create a feedback loop: Establish a feedback mechanism for payroll staff to report any challenges or discrepancies encountered during the payroll process. Regularly review and adjust your processes based on feedback and any changes in legislation or benefits offerings.

While the new reporting requirements will officially take effect in April 2026, organisations may wish to consider adopting these changes early. Early adoption can provide several advantages, including:

• Transparency and trust: By implementing the new reporting processes ahead of time, businesses can identify and address any potential issues before the deadline. Employees will also be better informed about how their benefits are taxed, leading to increased transparency and trust.
• Streamlined transition: Early adoption can help minimise disruption to payroll operations when the mandate comes into force by providing adequate time for colleagues to identify and rectify any issues in the payroll process. 
• Enhanced compliance: Getting a head start allows organisations to better understand the requirements and ensure they are fully compliant with the new regulations. Transitioning early allows your organisation to be fully compliant before the mandatory deadline.

To stay informed about the new reporting requirements, employers should utilise the following resources:

• HM Revenue & Customs (HMRC): The HMRC website will be a key source of information regarding the new reporting requirements. Regularly checking for updates and official announcements will help you stay ahead of the curve.
• Professional advisors: Engaging with tax advisors or legal counsel can provide tailored guidance on how these changes may impact your organisation, ensuring compliance with all relevant regulations.

For further assistance or specific queries regarding the implementation of these changes, please do not hesitate to reach out to your Mercer Marsh Benefits consultant or get in touch here.

Footnotes

1.gov.uk/government/publications/reporting-and-paying-income-tax-and-class-1a-nics-on-benefits-in-kind-in-real-time/confirming-plans-to-mandate-the-reporting-of-benefits-in-kind-via-payroll-software-from-april-2026