2027 BiK Reporting Changes

From 6 April 2027, the way employers report most benefits in kind (BiK) is expected to change significantly. Instead of dealing with employee benefits after the tax year through forms P11D and P11D(b), employers will need to report them through payroll during the tax year.

For small businesses, contractors with limited companies, and owner managed companies, this is more than a technical payroll update. Benefits such as company cars, private medical insurance, gym memberships, fuel cards, mobile phones, and other employee perks often sit outside normal payroll routines.

The current P11D process still applies for the 2025 to 2026 tax year, which runs from 6 April 2025 to 5 April 2026. The real change is expected to start from 6 April 2027, when most benefits for the 2027 to 2028 tax year move into Real Time Information reporting through payroll.

These BiK Reporting Changes are designed to make benefit taxation more current and visible. However, they also increase the need for accurate monthly data, reliable payroll software, and clear communication between employers, payroll teams, and accountants.

BiK Reporting Changes

The BiK Reporting Changes mean that from 6 April 2027, most benefits in kind and taxable employment expenses are expected to be reported through payroll software using the Full Payment Submission. This is the Real Time Information process already used to report salary, PAYE tax, National Insurance, and employee pay details to HMRC.

At the moment, many employers report benefits after the tax year using forms P11D and P11D(b). The employer calculates the taxable value of each benefit, reports it to HMRC, gives the employee a copy, and pays any Class 1A National Insurance due. The main annual deadline is 6 July after the end of the tax year. Class 1A National Insurance is normally due by 22 July if paid electronically, or 19 July if paying by cheque.

From 6 April 2027, most of that process is expected to move into payroll. The taxable value of each benefit will need to be calculated and spread across the relevant pay periods. For example, if an employee receives a taxable benefit with an annual value, the employer will usually divide that value across weekly, monthly, quarterly, or other payroll periods.

This means the employee pays tax on the benefit during the year. The tax will usually be collected through payroll, rather than through a later adjustment to the employee’s tax code after a P11D has been submitted. This should make benefit tax more visible during the year, but it also means payroll information must be accurate before each submission.

Class 1A National Insurance is also expected to move into real time reporting for most benefits. This changes the timing of employer costs. Instead of paying Class 1A National Insurance after the tax year, employers will need to account for it as the payroll year progresses.

There are important exceptions. Employment related loans and employer provided living accommodation are not expected to become mandatory from 6 April 2027. Employers are expected to be able to payroll these voluntarily from the 2027 to 2028 tax year, but they will need to register by 5 April 2027 if they want to do so. HMRC expects a new voluntary registration service for these benefits to open in November 2026.

The biggest operational change is the move from annual review to live payroll management. Benefit information will need to be captured earlier. Payroll systems will need to hold the correct benefit values. Finance, HR, directors, and accountants will need a clear process for sharing changes before payroll submissions are made.

This is where having effective accounting software and payroll systems becomes important. A business that currently keeps benefit records separately from payroll will need a better workflow. The system should record the benefit, update the taxable value, and allow payroll submissions to be checked before they are sent to HMRC.

How it impacts you

For small employers, this change turns benefits reporting into a regular payroll responsibility. A process that may currently happen once a year becomes part of the normal pay cycle.

This is especially relevant where the same person is both director and employee. Many small limited companies provide benefits such as private medical insurance, company cars, company vans, fuel, mobile phones, or professional subscriptions. These benefits may currently be reviewed once a year by the accountant. From 6 April 2027, the figures will need to be available in time for payroll.

For contractors operating through limited companies, the impact depends on whether the company provides taxable benefits. A contractor with no taxable benefits may see little practical change. A contractor with a company car, medical cover, or other director benefits will need to make sure those benefits are identified, valued, and processed correctly before each payroll submission.

For employees, the change should make tax on benefits more visible during the year. Instead of receiving a P11D after the tax year and seeing a later tax code adjustment, the benefit tax will usually be collected through payroll as the benefit is received. This may feel cleaner, but it may also raise questions when take home pay changes.

For employers, the main challenge is timing. Payroll teams and accountants will need accurate benefit information before the next payroll run. If a company car changes part way through the year, if medical cover starts during the year, or if a fuel card is introduced, the payroll figure may need to be updated quickly.

There may also be a cash flow impact. Class 1A National Insurance is currently paid after the end of the tax year. Under the new system, it is expected to be reported and paid through the payroll cycle for most benefits. This spreads the cost across the year, but it also removes the current annual payment timing.

The final year before the new rules is important. Benefits provided in the 2026 to 2027 tax year, from 6 April 2026 to 5 April 2027, are expected to remain within the annual P11D process unless voluntarily payrolled. From 6 April 2027, the new payroll reporting approach is expected to apply for most benefits.

This change also affects bookkeeping and projecting finances going forward. If benefit costs are updated more regularly, directors can see the real staff cost of benefits during the year. That gives a clearer picture of payroll cost, tax cost, and overall business performance.

What you can do

Start by listing every benefit currently provided to employees, directors, or workers. Include obvious benefits such as company cars and private medical insurance. Also check smaller items such as subscriptions, gym memberships, fuel cards, beneficial loans, accommodation, mobile phones, and expenses that may be taxable.

Next, check whether your payroll software can handle benefits in kind reporting. This is not only about adding another pay item. The software will need to hold benefit values, report the correct fields through the Full Payment Submission, and deal with changes during the year.

Employers should also review how benefit information reaches payroll. If the person approving private medical cover is not the same person running payroll, there needs to be a clear process. Payroll cannot report the correct value if the information arrives late or incomplete.

Businesses should consider using 2026 as a preparation year. If voluntary payrolling is available and suitable, using it before the mandatory start date can help identify problems with software, data, staff communication, and payroll review processes. This is particularly useful for employers with company cars, medical cover, or several employee benefits.

Use the key dates below as planning points:

For detail on the existing Employees Benefit reporting, check out our webpage:

www.ledgr-accountants.com/our-services/accounting-services/employee-benefits

Ish Mukit

Senior Accountant

References

1. www.gov.uk/guidance/draft-guidance-and-legislation-to-aid-preparation-for-reporting-benefits-in-kind-in-real-time/reporting-requirements

2. www.gov.uk/guidance/draft-guidance-and-legislation-to-aid-preparation-for-reporting-benefits-in-kind-in-real-time/getting-ready-for-mandatory-payrolling-of-benefits-in-kind