HMRC has postponed the introduction of mandatory payrolling for benefits in kind (BiKs) and taxable employment expenses to April 2027, one year later than initially planned.

This decision follows stakeholder feedback and provides employers, payroll professionals, software providers and tax agents additional preparation time for this significant change.

From April 2027, most BiKs and expenses will require Income Tax and Class 1A National Insurance contributions to be reported through Real Time Information (RTI) and paid in real time.

Tracy Gill, Whitley Stimpson Payroll Manager, commented: "This extension is welcome news for businesses of all sizes, providing crucial breathing space to understand requirements and adapt processes accordingly."

Key updates from HMRC's technical note include:

Most benefits in kind will be reported via the Full Payment Submission (FPS)
Data fields for BiK reporting will increase to align with current P11D forms
Payrolling of employer-provided loans and accommodation remains voluntary
A "light touch" penalty approach will apply during the first implementation year

During this transition, employers can continue voluntarily payrolling most BiKs for Income Tax before April 2026 by registering prior to this date. The voluntary registration service will close after April 5, 2026.

"With these regulatory changes approaching, many businesses are reconsidering whether to manage payroll in-house or outsource to specialists," Tracy notes.

"Outsourcing payroll helps businesses focus on development without worrying about administrative complexities."

For further information contact Tracy Gill: tracyg@whitleystimpson.co.uk or 01295 270200.