Introduction
At MWM Employee Benefits, we strive to keep our clients informed about important regulatory changes that impact their businesses. From April 2027, significant changes to the way Benefits in Kind (BiKs) are reported and taxed will come into effect. This is a postponement of the previously announced implementation date of April 2026; however, employers will be permitted to voluntarily adopt the changes earlier should they so wish.
This article provides an overview of these changes and how they will benefit both employers and employees.
Changes to payrolling benefits
Payrolling Benefits in Kind will become compulsory from April 2027, eliminating the need for employers to submit P11D forms at the end of the tax year. This measure aims to minimise the administrative burden for employers and HMRC, simplifying the process of reporting and the payment of tax. Prior to this date, employers have had the opportunity to payroll benefits following submission of an application to HMRC. The main benefits to employers are:
- Simplified Administration
By including benefits in the payroll system, employers can streamline the process of reporting and taxing benefits. This reduces the need for separate P11D forms and minimises administrative workload.
- Enhanced Compliance
With benefits being taxed through payroll, employers are more likely to stay compliant with HMRC regulations. This reduces the risk of penalties and fines associated with incorrect or late submissions.
- Cost Efficiency
Automating the process of taxing benefits through payroll can lead to cost savings by reducing the need for manual processing and paperwork. This can free up resources for other important business activities.
- Improved Accuracy
Real-time reporting ensures that tax deductions are accurate and up to date, reducing the risk of errors and discrepancies. This can lead to fewer corrections and adjustments at the end of the tax year.
- Better Employee Relations
Employees appreciate the transparency and simplicity of seeing their benefits and associated taxes on their payslips. This can lead to improved trust and satisfaction among the workforce.
- Real-Time Adjustments
Any changes in benefits or tax rates are immediately reflected in the payroll, ensuring that both employers and employees are always working with the most current information. This can help in managing cash flow and financial planning more effectively.
In addition to benefits for employers, there are also the following benefits to employees:
- Real-Time Taxation
Employees pay taxes on benefits as they receive them, rather than facing a lump sum tax bill at the end of the year. This can help with budgeting and financial planning.
- Transparency
Employees can see the value of their benefits and the associated tax deductions on their payslips, providing clearer insight into their total compensation package.
- Immediate Adjustments
Any changes in benefits or tax rates are reflected immediately in the payroll, ensuring employees are always paying the correct amount of tax.
- Simplified Tax Reporting
Since benefits are taxed through payroll, employees don’t need to worry about reporting these benefits separately on their tax returns. This reduces the administrative burden and potential for errors.
- Consistent Tax Deductions
With real-time reporting, tax deductions are spread evenly throughout the year, avoiding large, unexpected tax bills. This consistency can make financial management easier.
Conclusion
These changes to UK payrolling benefits represent a significant shift in how benefits are reported and taxed. By preparing now, you can ensure a smooth transition and continued compliance. Adopting the changes from April 2026 will make sure you are ahead of the statutory compliance date and any payroll and benefit provider capacity issues that may result at that time. At MWM Employee Benefits, we are here to help you every step of the way. Contact us today to learn more about how we can support you through these changes.
Disclaimer:
The information provided is for general information only and is not intended to address the particular requirements of an individual or business. It does not constitute any form of advice or recommendation by MWM Employee Benefits or Menzies Wealth Management Ltd and should not be relied upon by individuals in either making or refraining from making any financial decisions. Where necessary, you should seek appropriate professional advice before acting on any of the information provided.
MWM Employee Benefits is an appointed representative of Menzies Wealth Management who is regulated and authorised by the Financial Conduct Authority (FRN 486548).
Menzies Wealth Management Limited is registered in England and Wales under number 06597008. Our registered office is at 4th Floor, 95 Gresham Street, London, EC2V 7AB
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