Upcoming Changes to Benefits in Kind (BiKs) and P11Ds: What Employers Need to Know
Starting April 2027, significant changes are coming to the way employers process Benefits in Kind (BiKs).
Currently, employers have the option to process BiKs through payroll voluntarily, choosing which benefits to include. This flexibility can eliminate the need for P11D forms. However, the new regulations will bring some important updates.
These changes were planned to come into effect from April 2026 but the government has delayed until April 2027 to provide more time for employers, payroll professionals, software providers, tax agents and others to prepare for the change.
Key Changes Effective April 2027:
- Elimination of P11D Forms for Payrolled Benefits - Employers who opt to process BiKs through payroll will no longer need to prepare and file P11D forms for those benefits. This simplifies the administrative process and reduces paperwork.
- Mandatory Payroll Benefiting: Employers need to process all benefits through the payroll. P11D forms will no longer exist.
- Tax Code Adjustments for Employees- Employees with BiKs in their tax code need to ensure these are removed. This adjustment prevents double taxation and aligns with the new payroll processing.
- Company Car Benefits - Employers payrolling company car benefits do not need to submit a P46 (Car) form as all benefits must be payrolled.
First Year of Payrolling Benefits: Employee Notification
In the first year of payrolling benefits, employers must provide written notice to their employees. This notice should explain:
- That benefits are being payrolled and what it means for the employees.
- Assurance that employees will not be taxed twice on these benefits.
- That their tax code will be amended to remove the BiK adjustment.
- That the BiK adjusted amount will go through payroll and be subject to tax.
- At the end of the tax year, employees will receive details of the taxable benefits they had during the year.
Annual Employer Obligations by June 1st
After the end of each tax year, by June 1st, employers must provide employees with:
- Details of the benefits that have been payrolled.
- The cash equivalent of each payrolled benefit.
- Separate details of any benefits not payrolled.
This information can be communicated via letter, email, or on the pay slip.
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March 2025
