Benefits in Kind reporting guidance

From April 2026 all Benefits in Kind (BiKs) – except for employment-related loans and accommodation – will be mandated to be reported via payroll.¹ This change is set to streamline the reporting process and enhance compliance for UK employers.

Benefits in Kind refer to non-cash perks provided to employees, which can include a wide range of offerings such as company cars, private medical insurance, and other employee benefits.

Traditionally, tax and National Insurance Contributions (NIC) on these benefits have been calculated via P11Ds. However, from 2026 these will need to be reported and taxed through payroll.

With this new mandate employers must understand which benefits fall under this category and how they will be impacted by the upcoming changes.

How to prepare

Consider the following action steps:

1. Conduct a thorough review of all benefits currently offered to employees. Identify which benefits will need to be included in the payroll process.
2. Consult with your payroll provider to understand how they will support your organisation in implementing these changes. They can provide valuable insights into the necessary adjustments to your payroll systems.
3. Provide training for HR and payroll teams on the new processes and requirements for reporting BiKs. 
4. Ensure your payroll software is capable of handling BiKs. This may involve software updates or changes to your payroll processes.
5. Inform employees about the changes and how it will affect their pay and tax calculations. Clear communication is key to managing expectations.
6. Request monthly reports on new joiners, leavers, and changes to employee benefits in a standardised format for payroll integration. Implement data accuracy checks and hold regular meetings to address any issues or updates.
7. Establish a feedback mechanism for payroll staff to report any challenges or discrepancies encountered during the payroll process. Regularly review and adjust your processes based on feedback and any changes in legislation or benefits offerings.

For more information keep an eye on updates from HMRC and engage with professional tax/legal advisors. If you require assistance regarding the implementation of these changes contact Mercer Marsh Benefits.

^Footnotes

1. ^{gov.uk/government/publications/reporting-and-paying-income-tax-and-class-1a-nics-on-benefits-in-kind-in-real-time/confirming-plans-to-mandate-the-reporting-of-benefits-in-kind-via-payroll-software-from-april-2026}

^{The information contained herein is based on sources we believe reliable and should be understood to be general information only. The information is not intended to be taken as advice and cannot be relied upon as such. Statements concerning legal, tax or accounting matters should be understood to be general observations and should not be relied upon as legal, tax or accounting advice, which we are not authorised to provide.}