Payrolling Benefits in Kind (“PBIK”) will become mandatory from 6 April 2026 - are you prepared?

Before this change takes effect, employers can voluntarily register to join the scheme and payroll benefits. Agreement with HMRC needs to be in place before the beginning of the tax year the employer wishes to payroll benefits. In effect this means there is only one tax year left (2025/26), in which employers can voluntarily transition to payrolling benefits.

According to the Government’s latest statistics, there are c.1.4m employers in the UK. Whilst there is no data issued identifying how many are currently payrolling benefits, it is likely a significant number of employers will look to payroll benefits for the first time when it becomes mandatory.

Payrolling benefits in the 2025/26 tax year could help employers get ahead of the curve (and the rush) prior to when the scheme becomes mandatory. It also provides the opportunity to ‘test out’ the scheme and internal processes on a small number of employees and/or benefits.

Key points to consider and suggestions on next steps:

• Are your benefits and payroll teams aligned? Who will be responsible for capturing and reporting the benefits through payroll? 

  Consider putting together a working group to iron our teething problems and agreed and plan how teams will work together effectively.

• Is your benefit data robust and up to date; are your benefit providers prepared for the changes – can they provide real-time benefit data? 

  It may be worth speaking to benefit providers now so they can understand your requirements and whether their systems can meet these. It would also be prudent to discuss any additional fees at this stage. 

• Are your payroll/benefits systems capable of reporting and calculating benefits in real-time?

  Consider running dummy test data now to understand your systems capabilities. 

• If payroll is outsourced how will the new scheme be managed; will there be additional costs/fees?

• In the first year of payrolling, employees may experience an overlap in respect of the income tax payable on the previous year’s benefits (reported via a P11D) and the current year income tax on payrolled benefits.

  It will be key to engage with employees to make them aware of the changes and impact on their net pay. Consider circulating FAQs and running employee workshops. 

• Class 1A National Insurance payment date is to be brought forward and will be payable in ‘real-time’; how will businesses absorb this cashflow impact?

  Now may be the time to raise this point with finance teams and consider/discuss how accruals may be affected. 

Points clarified in the Autumn Budget

• Payrolling of accommodation and beneficial loan benefits will be mandated later; for now, these can be payrolled on a voluntary basis.
• No announcement has been made on whether P11Ds and P11D(b) forms are to be abolished, however this does seem likely.
• Guidance is due to be published in mid to late 2025, to assist software developers with the technical specifications on additional data items to be added to RTI.
• No mention was made as to whether there will be a ‘soft’ landing, penalty amnesty, once payrolling becomes mandatory.

How A&M can help

• There is no one size fits all solution, however key considerations have come out of our discussions with clients and benefit providers. Our understanding of these will be informative and helpful to you as you navigate these changes. 
• We have an experienced team of employment tax specialists who can advise and support. Whether it is an early adoption of the scheme or preparation for 2026 we are here to help and offer guidance. 
• If you have any questions, or just want to talk through the changes we are here to help. 

Download the full PDF here