For BIK provided in 2026/27, it is expected that most employers will continue to follow the traditional form P11D process. This involves reporting BIK to HMRC on form P11D and paying any class 1A national insurance contributions due, with the employees’ income tax liability usually collected via an adjusted tax code or sometimes through the self assessment tax return.  

The employer does also have the option of including most types of BIK in their payroll. Depending on the circumstances, this could simplify the employer’s BIK reporting. However, there are a number of implications to consider, including that the employees will pay income tax on current year BIK earlier than would otherwise have been the case while also paying the tax due on the prior year BIK under the previous mechanism. 

For 2027/28 onwards, it will be compulsory to payroll all BIK except for employer-provided living accommodation and beneficial loans. Therefore, payrolling BIK in 2026/27 could help the employer to prepare for the challenges to come, although it is important to note that the mandatory scheme is likely to be significantly different to the voluntary scheme currently available. It is possible to payroll some BIK and to report others on form P11D, allowing the employer to test payrolling with BIK that is simpler to calculate, process and explain to employees.  

An employer who wishes to payroll BIK for 2026/27, and has not registered with HMRC for that purpose previously, must register with HMRC by 5 April 2026. The current registration service will close after 5 April 2026 and, in due course, will be replaced with a new registration service for BIK for employer-provided living accommodation and beneficial loans for 2027/28 onwards. 

Adelle Greenwood, Technical Manager – Employment Taxes and NIC, said: "Payrolling BIK voluntarily in 2026/27 is an opportunity for employers to get ahead of the game before it becomes mandatory in a little over a year’s time. However, employers need to carefully think through the implications – for themselves and their employees – before registering, keeping in mind that hard deadline of 5 April 2026.”