Measure
The previous government had announced the introduction of mandatory reporting and collection of income tax and Class 1A National Insurance contributions on benefits in kind (BiKs) in real time through the payroll from 6 April 2026. The new government has today confirmed that it will proceed with this measure. It will apply to all BiKs, with the exception of employment related loans and accommodation. Payrolling these benefits will remain voluntary and the P11D/P11D(b) process remains available for these benefits for the time being. A timeline for mandatory payrolling of these BiKs will be set out in due course.
While there is an expectation that most BiKs will be reported in a timely and accurate way in-year, the government acknowledges that employers will be able to make corrections in-year via their payroll systems. Where this is not possible, e.g. where data about a benefit is received after the end of the tax year, an end-of-year process will be introduced for employers to amend the taxable values of BiKs that cannot be determined during the tax year. While stopping short of announcing a light touch approach to penalties in the first year, HMRC recognise that there will be a period of adjustment.
HMRC have flagged that they expect more granular BiKs data to be provided by employers under real time information (RTI).
The government also acknowledges that the mandatory regime is challenging for populations such as globally mobile employees and HMRC will provide further updates on this in due course.
Current legislation and processes to exempt digitally excluded customers from reporting through RTI will continue to apply.
Further updates setting out more detail will be provided in due course, together with draft legislation for comment in 2025 (date unspecified) and technical specifications for software developers expected mid to late 2025.
Employers who provide BiKs to their employees, their employees, benefit providers and payroll software providers.
This measure will take effect from 6 April 2026 for taxable BiKs, with the exception of employment related loans and accommodation.
It is no surprise that HMRC have confirmed their intention to press ahead with this measure. There are some welcome developments such as HMRC’s exclusion of complex employment related loans and accommodation benefits from the measure, temporarily at least, and the requirement for an end-of-year-process to pick up changes that cannot be processed in real time. However, the paucity of currently published detail on the operational practicalities and lack of a clear date for publication of the draft legislation are disappointing. Implementing significant payroll changes has long lead times and the delay in publishing details may put many employers under pressure to deliver a process by 6 April 2026.