In February 2025, ICAEW set out its concerns with the government’s plans to mandate payrolling of BIK in a representation to HMRC, and called for the start date to be postponed.

The government responded on 28 April 2025, announcing a welcome delay to the mandatory payrolling of BIK, and published a technical note that addresses many of the outstanding issues and concerns raised by ICAEW. James Murray MP, Exchequer Secretary to HM Treasury, referred to feedback received from ICAEW in a written statement to Parliament.

ICAEW’s Tax Faculty summarises some of the key points from the technical note below, and recommends that employers, payroll providers and software developers make use of the delay to prepare for the new requirements.

April 2027 start date

From April 2027, most benefits will need to be processed via a payroll on a real-time basis with pay as you earn and class 1A national insurance contributions (NICs) paid during the tax year.  

The data fields on the full payment summary (FPS) will be expanded to match the current P11D reporting. Employees will need to be informed of the value of payrolled benefits by 1 June following the end of the tax year, although there will be no prescribed format for this reporting.

There will be a soft landing during 2027/28, with penalties for BIK-related inaccuracies not expected to apply except in the case of deliberate non-compliance. The existing penalty regime will continue to apply to reporting under real-time information (RTI) and the current P11D process.

Loans and accommodation BIKs

Payrolling of employer-related loans and accommodation will still be voluntary from 6 April 2027 due to the way the value of those benefits is calculated. It is not clear when payrolling of those benefits will become mandatory. Therefore, forms P11D and P11D(b) will be retained for the foreseeable future to account for those benefits, as well as potentially for globally mobile employees on modified payrolls.  

Registering to payroll BIK

As payrolling of benefits in kind will become the default, employers will not need to register from April 2027, other than to voluntarily payroll loans and accommodation BIKs. For employers who wish to get ahead and voluntarily payroll in 2026/27, the registration deadline is still 5 April 2026. There is no facility to register during the tax year. Registration for voluntary payrolling for loans and accommodation will be available from November 2026 and must be completed before 5 April 2027.

Impact on tax codes

Tax codes will be updated before April 2027 to remove BIKs, but underpayments from prior tax years will remain. If employees are concerned about cashflow during the first year of payrolled benefits (as they may still also be paying the tax on a non-payrolled benefit from the previous tax year), they may contact HMRC to request that the underpayment is spread out over a longer period. Communication with employees therefore is key.

Updating figures

HMRC’s technical note also expands on the process for updating BIK calculations related to under or over payments of tax and NICs. The process must be completed by 6 July after the end of the tax year, although further details are still to come.  

The general rule is that employers will need to divide the cash equivalent of the benefits and expenses they will be providing across the number of relevant pay periods for each employee. A reasonable estimate can be used if the value is not known at the start of the year. Any changes in value should be spread out across the remainder of the tax year. Additional tax due or repayable will be managed via the P800, simple assessment or self-assessment process, with adjusted class 1A NIC due by 22 July.

Other circumstances

The technical note provides further details on some less common situations, including:

• employees affected by the 50% overriding regulatory limit;
• employees with no earnings;
• BIKs provided after leaving an employment;
• employees with unusual pay periods; and 
• employees with no earnings other than BIK.

Next steps

It is expected that draft legislation and guidance will be published in autumn 2025 for further consultation until April 2026, and initial technical information made available to software developers in December 2025.

Further information

• Economy explainers: what is payrolling of benefits? | ICAEW