{"id":23063,"date":"2025-06-27T14:21:23","date_gmt":"2025-06-27T13:21:23","guid":{"rendered":"https:\/\/www.sage.com\/en-gb\/blog\/?p=23063"},"modified":"2025-06-27T14:21:25","modified_gmt":"2025-06-27T13:21:25","slug":"what-are-payrolling-benefits-in-kind","status":"publish","type":"post","link":"https:\/\/www.sage.com\/en-gb\/blog\/what-are-payrolling-benefits-in-kind\/","title":{"rendered":"Payrolling benefits in kind: What you need to know"},"content":{"rendered":"<header class=\"entry-header has-dark-background-color entry-header--has-illustration entry-header--has-illustration--generic\">\n\t<div class=\"container\">\n\t\t<div class=\"entry-header__row row align-center\">\n\t\t\t<div class=\"col col-lg-7 col-xlg-6 entry-header__content\">\n\t\t\t\t\t\t\t<div class=\"component component-single-header\">\n\t\t\t\t\t\t\t\t\t\t<div class=\"entry-header__misc text--subtitle text--uppercase text--small\">\n\t\t\t\t\t\t\t<a href=\"https:\/\/www.sage.com\/en-gb\/blog\/category\/money-matters\/\" class=\"entry-header__link\">Money Matters<\/a>\t\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t<div class=\"entry-title-wrapper\">\n\t\t\t\t\t<h1 class=\"entry-title\">\n\t\t\t\t\t\tPayrolling benefits in kind: What you need to know\t\t\t\t\t<\/h1>\n\t\t\t\t<\/div>\n\n\t\t\t\t\t\t\t\t\t<p class=\"entry-header__description\">\n\t\t\t\t\t\t\t\t\t\t\t<\/p>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n\t\t<div class=\"single-post-details container\">\n\t\t<div class=\"col\">\n\t\t\t<span class=\"posted-on \"><time class=\"entry-date published\" datetime=\"2025-06-27T14:21:23+01:00\">27 June, 2025<\/time><\/span><span class=\"reading-time\"> min read<\/span>\n\t\t<button\n\t\t\ttype=\"button\"\n\t\t\tclass=\"social-share-button button button--icon button--secondary js-social-share-button\"\n\t\t\tdata-share-title=\"Payrolling benefits in kind: What you need to know\"\n\t\t\tdata-share-url=\"https:\/\/www.sage.com\/en-gb\/blog\/what-are-payrolling-benefits-in-kind\/\"\n\t\t\tdata-share-text=\"Please read this interesting article\"\n\t\t>\n\t\t\t<span class=\"social-share-button__share-label\">Share<\/span>\n\t\t\t<span class=\"social-share-button__copy-label\" hidden>Copy Link<\/span>\n\t\t\t<span class=\"social-share-button__copy-tooltip\" aria-hidden=\"true\" hidden>Copied<\/span>\n\t\t<\/button>\n\n\t\t\t\t<\/div>\n\t<\/div>\n\t<\/header>\n\n\n\n<div class=\"wp-block-post-author has-dark-background-color alignfull\">\n\t<div class=\"container\">\n\t\t<div class=\"col\">\n\t\t\t\t\t\t\t<div class=\"co-authors\">\n\t\t\t\t\t\n\t\t<div class=\"entry-author-wrapper\">\n\t\t\t<a class=\"entry-author\" href=\"https:\/\/www.sage.com\/en-gb\/blog\/author\/ashleyhindsmansage\/\">\n\t\t\t\t<img loading=\"lazy\" decoding=\"async\" width=\"40\" height=\"40\" src=\"https:\/\/www.sage.com\/en-gb\/blog\/wp-content\/uploads\/sites\/10\/2025\/02\/Ashley-Thompson-350x350.jpg\" class=\"entry-author__image\" alt=\"Ashley Thompson\" srcset=\"https:\/\/www.sage.com\/en-gb\/blog\/wp-content\/uploads\/sites\/10\/2025\/02\/Ashley-Thompson-350x350.jpg 350w, https:\/\/www.sage.com\/en-gb\/blog\/wp-content\/uploads\/sites\/10\/2025\/02\/Ashley-Thompson.jpg 600w\" sizes=\"auto, (max-width: 40px) 100vw, 40px\" \/>\t\t\t\t<span class=\"entry-author__name\">Ashley Thompson<\/span>\n\t\t\t<\/a>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n<\/div>\n\n\n\n\n\n<p>From company cars to gym memberships, offering employee perks is a proven way to boost retention and engagement.<\/p>\n\n\n\n<p>But if you&#8217;ve ever struggled to understand how these benefits should be taxed or what needs to be reported to HMRC, you&#8217;re not alone.<\/p>\n\n\n\n<p>Payrolling benefits in kind becoming mandatory from April 2027. Now&#8217;s the time to get ahead of the curve.<\/p>\n\n\n\n<p>In this article, you&#8217;ll learn what payrolling benefits in kind means, how it differs from traditional P11D reporting, and what steps you need to take to stay compliant.<\/p>\n\n\n\n<p>Let&#8217;s make sense of it all so you&#8217;re ready before the rules change.<\/p>\n\n\n\n<p>Here&#8217;s what we cover:<\/p>\n\n\n<?xml encoding=\"utf-8\" ?><div class=\"wp-block-yoast-seo-table-of-contents yoast-table-of-contents\"><ul><li><a href=\"#h-what-does-payrolling-benefits-in-kind-mean\" data-level=\"2\">What does payrolling benefits in kind mean?<\/a><\/li><li><a href=\"#h-common-types-of-benefits-in-kind\" data-level=\"2\">Common types of benefits in kind<\/a><\/li><li><a href=\"#h-why-businesses-offer-benefits-in-kind\" data-level=\"2\">Why businesses offer benefits in kind<\/a><\/li><li><a href=\"#h-why-is-payrolling-benefits-in-kind-becoming-mandatory\" data-level=\"2\">Why is payrolling benefits in kind becoming mandatory?<\/a><\/li><li><a href=\"#h-how-to-register-for-payrolling-benefits-in-kind\" data-level=\"2\">How to register for payrolling benefits in kind<\/a><\/li><li><a href=\"#h-how-to-payroll-benefits-in-kind\" data-level=\"2\">How to payroll benefits in kind<\/a><\/li><li><a href=\"#h-tips-for-setup-and-employee-communication\" data-level=\"2\">Tips for setup and employee communication<\/a><\/li><li><a href=\"#h-how-payroll-software-can-help\" data-level=\"2\">How payroll software can help<\/a><\/li><li><a href=\"#h-common-mistakes-to-avoid-when-payrolling-benefits\" data-level=\"2\">Common mistakes to avoid when payrolling benefits<\/a><\/li><li><a href=\"#h-planning-ahead-what-to-do-now\" data-level=\"2\">Planning ahead: What to do now<\/a><\/li><li><a href=\"#h-final-thoughts\" data-level=\"2\">Final thoughts<\/a><\/li><\/ul><\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-what-does-payrolling-benefits-in-kind-mean\">What does payrolling benefits in kind mean?<\/h2>\n\n\n\n<p>Payrolling benefits in kind, often referred to as BIKs, means processing the tax on employee benefits through your payroll instead of reporting them separately at year-end on a P11D form.<\/p>\n\n\n\n<p>Rather than waiting until the end of the tax year to settle up, the tax is deducted from your employee&#8217;s pay each month.<\/p>\n\n\n\n<p>This gives employees more visibility into what&#8217;s being taxed and when, and it saves you time and admin effort throughout the year.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-common-types-of-benefits-in-kind\">Common types of benefits in kind<\/h2>\n\n\n\n<p>Some of the most commonly payrolled BIKs include:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Company cars and fuel<\/li>\n\n\n\n<li>Private medical insurance<\/li>\n\n\n\n<li>Interest-free or low-interest loans<\/li>\n\n\n\n<li>Mobile phones and broadband<\/li>\n\n\n\n<li>Gym memberships or wellness subscriptions.<\/li>\n<\/ul>\n\n\n\n<p>Not all benefits are eligible, but many are. It&#8217;s worth reviewing what you currently offer and checking against <a href=\"https:\/\/www.gov.uk\/expenses-and-benefits-a-to-z\">HMRC&#8217;s guidance<\/a> to see what applies.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-why-businesses-offer-benefits-in-kind\">Why businesses offer benefits in kind<\/h2>\n\n\n\n<p>BIKs are more than just perks. They&#8217;re a strategic way to attract and retain top talent in today&#8217;s competitive job market.<\/p>\n\n\n\n<p>Perks such as flexible working tools, wellness allowances, and electric vehicle schemes show that your business cares about more than just productivity.<\/p>\n\n\n\n<p>Today&#8217;s employees expect more than just a payslip. Flexible perks and personalised benefits often tip the scales in attracting top talent.<\/p>\n\n\n\n<p>For growing businesses, offering thoughtful benefits can make your organisation stand out without requiring large salary increases.<\/p>\n\n\n\n<p>When structured well, they show that your business values wellbeing, convenience, and long-term growth\u2014making benefits a powerful part of your employer brand.<\/p>\n\n\n\n<p>If you&#8217;re thinking about your broader people strategy, it&#8217;s worth considering how benefits fit into the overall <a href=\"https:\/\/www.sage.com\/en-gb\/blog\/how-to-improve-employee-experience\/\">employee experience<\/a> you want to create.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-why-is-payrolling-benefits-in-kind-becoming-mandatory\">Why is payrolling benefits in kind becoming mandatory?<\/h2>\n\n\n\n<p>This move is all about making things simpler and more transparent. <\/p>\n\n\n\n<p>Employees can see the impact of their benefits on their pay in real time, and employers can reduce the year-end reporting burden.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-how-to-register-for-payrolling-benefits-in-kind\">How to register for payrolling benefits in kind<\/h2>\n\n\n\n<p>To start payrolling benefits, you need to register with HMRC before the beginning of the tax year in which you want to start.<\/p>\n\n\n\n<p>Here&#8217;s what to do:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>Sign into your <a href=\"https:\/\/www.gov.uk\/paye-online\">HMRC online account.<\/a><\/li>\n\n\n\n<li>Select &#8220;payrolling employees&#8217; benefits and expenses&#8221;.<\/li>\n\n\n\n<li>Specify which benefits you&#8217;ll be including.<\/li>\n\n\n\n<li>Complete your registration before 5 April.<\/li>\n<\/ol>\n\n\n\n<p>If you miss the deadline, you&#8217;ll need to report those benefits the traditional way for that year.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-how-to-payroll-benefits-in-kind\">How to payroll benefits in kind<\/h2>\n\n\n\n<p>Once registered, the next step is integrating payrolling into your regular payroll cycle.<\/p>\n\n\n\n<p>Here&#8217;s what&#8217;s involved:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Add the taxable value of each benefit to your payroll software<\/li>\n\n\n\n<li>Make sure employees understand what will be deducted and why<\/li>\n\n\n\n<li>Maintain detailed records of all benefits provided<\/li>\n\n\n\n<li>Don&#8217;t include payrolled benefits on the P11D form.<\/li>\n<\/ul>\n\n\n\n<p>Even if you payroll all benefits, you still need to submit the P11D(b) to cover employer NICs.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-tips-for-setup-and-employee-communication\">Tips for setup and employee communication<\/h2>\n\n\n\n<p>A smooth rollout depends on good internal communication and clear systems.<\/p>\n\n\n\n<p>Here are a few helpful steps:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Host a brief team session or record a short explainer video<\/li>\n\n\n\n<li>Follow up with an email that includes key dates, links, and FAQs<\/li>\n\n\n\n<li>Update payslip formats to make BIK deductions easy to understand<\/li>\n\n\n\n<li>Appoint someone in HR or payroll as the go-to for questions<\/li>\n\n\n\n<li>Test your payroll setup well ahead of time to avoid any surprises.<\/li>\n<\/ul>\n\n\n\n<p>Employees will appreciate the clarity. It&#8217;s a chance to build trust while handling an important change well.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-how-payroll-software-can-help\">How payroll software can help<\/h2>\n\n\n\n<p>Good payroll software can make the entire process far easier. It can:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Calculate tax due on each benefit<\/li>\n\n\n\n<li>Submit data directly to HMRC<\/li>\n\n\n\n<li>Maintain records for audits or employee questions<\/li>\n\n\n\n<li>Automate P11D(b) reporting<\/li>\n\n\n\n<li>Ensure Class 1A NICs are calculated correctly.<\/li>\n<\/ul>\n\n\n\n<p>For more practical tips, check out our guide on <a href=\"https:\/\/www.sage.com\/en-gb\/blog\/payroll-automation-how-it-works-and-how-it-can-benefit-your-business\/\">how payroll automation works<\/a>.<\/p>\n\n\n\n<p>You can also explore how Sage&#8217;s <a href=\"https:\/\/www.sage.com\/en-gb\/human-resources\/\">HR solutions<\/a> support compliance and simplify tax reporting.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-common-mistakes-to-avoid-when-payrolling-benefits\">Common mistakes to avoid when payrolling benefits<\/h2>\n\n\n\n<p>Getting started with payrolling benefits is relatively simple, but there are a few easy missteps that can cause issues if you&#8217;re not prepared:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Missing the registration deadline: <\/strong>you must register with HMRC before 5 April to begin payrolling benefits in the following tax year. If you miss this cut-off date, you&#8217;ll need to report benefits via P11Ds for another year.<\/li>\n\n\n\n<li><strong>Not communicating clearly with employees: <\/strong>if your team sees new deductions on their payslip without any warning, it can cause confusion or frustration. A clear explanation ahead of time helps everyone feel informed and reassured.<\/li>\n\n\n\n<li><strong>Forgetting the P11D(b): <\/strong>even if all benefits are payrolled, you still need to submit a P11D(b) to cover your Class 1A National Insurance responsibilities. This step is easily overlooked in early setups.<\/li>\n\n\n\n<li><strong>Assuming your software handles it all automatically: <\/strong>not all payroll systems are fully configured to manage BIKs accurately. Check with your provider to confirm your setup is correct, especially for benefit values and tax codes.<\/li>\n<\/ul>\n\n\n\n<p>Avoiding these issues will help ensure compliance, reduce employee questions, and set the stage for a smooth transition as payrolling becomes mandatory.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-planning-ahead-what-to-do-now\">Planning ahead: What to do now<\/h2>\n\n\n\n<p>With the 2027 deadline on the horizon, now is the perfect time to review your existing benefits strategy.<\/p>\n\n\n\n<p>Start by listing every benefit your employees currently receive, then identify which ones qualify for payrolling.<\/p>\n\n\n\n<p>Speak to your payroll provider to understand what setup or training might be needed, and build an internal timeline that includes testing before the 2026\/27 tax year begins.<\/p>\n\n\n\n<p>It&#8217;s also worth involving your finance and HR teams early. Payrolling benefits affects both tax reporting and employee engagement, so cross-functional planning can help catch issues early and ensure nothing slips through the cracks.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-final-thoughts\">Final thoughts<\/h2>\n\n\n\n<p>Payrolling benefits in kind will be a legal requirement from April 2027. But the sooner you prepare, the easier the transition will be.<\/p>\n\n\n\n<p>By getting familiar with the rules, registering early, and making sure your employees know what to expect, you&#8217;ll reduce stress for everyone. And with the right software and systems in place, payrolling can become one of the simplest parts of your year-end process.<\/p>\n\n\n\n<p>Start now by reviewing your benefits, aligning with your payroll provider, and keeping your team in the loop.<\/p>\n\n\n\n<p>Take it one step at a time, test your systems early, and you&#8217;ll be in a strong position well before the 2027 deadline. <\/p>\n\n\n\n<p>The earlier you act, the easier it will be to build payrolling in kind into your everyday payroll process\u2014and reduce stress at year-end for good.<\/p>\n\n\n<div class=\"single-cta\">\n\t<div class=\"single-cta__positioner\">\n\t\t<div class=\"single-cta__wrapper has-dark-background-color\">\n\t\t\t<div class=\"single-cta__content\">\n\t\t\t\t\t\t\t\t<h2 class=\"single-cta__title h3\">Subscribe to the Sage Advice newsletter<\/h2>\n\n\t\t\t\t\t\t\t\t\t<div class=\"single-cta__description\">\n\t\t\t\t\t\t<p>Join more than 500,000 UK readers and get the best business admin strategies and tactics, as well as actionable advice to help your company thrive, in your inbox every month.<\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<a\n\t\t\t\t\t\thref=\"#gate-b1a63862-3fa0-4a5e-bb67-c76b88bbc6b8\"\n\t\t\t\t\t\tclass=\"single-cta__button button button--primary\"\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t>Subscribe now<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<img decoding=\"async\" width=\"1440\" height=\"810\" src=\"https:\/\/www.sage.com\/en-gb\/blog\/wp-content\/uploads\/sites\/10\/2022\/04\/GettyImages-1073797282-1-1440x810.jpg\" class=\"single-cta__image\" alt=\"\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-gb\/blog\/wp-content\/uploads\/sites\/10\/2022\/04\/GettyImages-1073797282-1-1440x810.jpg 1440w\" sizes=\"auto, (min-width: 48em) 33vw, 100vw\" \/>\t\t\t<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Get ready for 2027. Learn what payrolling benefits in kind means, how it works, and how to stay compliant with simple, actionable steps for your HR team.<\/p>\n","protected":false},"author":281,"featured_media":11424,"menu_order":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_sage_video":false,"post_featured_image_hide":false,"sage_hide_published_date":false,"sage_hide_read_time":false,"sage_hide_share_buttons":false,"footnotes":""},"categories":[6],"tags":[225,234,37],"business_type":[4,3,115],"lilypad":[],"context":[],"industry":[],"persona":[67,69,73,74],"imagine_tag":[214,289,92,96,200,103,109],"coauthors":[354],"class_list":["post-23063","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-money-matters","tag-accountant-payroll","tag-hr-payroll-benefits","tag-payroll","business_type-small-business","business_type-medium-sized-business","business_type-accountants"],"sage_meta":{"region":"en-gb","author_name":"Ashley Thompson","featured_image":"https:\/\/www.sage.com\/en-gb\/blog\/wp-content\/uploads\/sites\/10\/2022\/04\/GettyImages-961279906.jpg","imagine_tags":{"214":"Accountant payroll","289":"Accounting and Payroll","92":"HR and Payroll","96":"Medium businesses","200":"Payroll","103":"Payroll software","109":"Small business"}},"distributor_meta":false,"distributor_terms":false,"distributor_media":false,"distributor_original_site_name":"Sage Advice UK","distributor_original_site_url":"https:\/\/www.sage.com\/en-gb\/blog","push-errors":false,"_links":{"self":[{"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/posts\/23063","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/users\/281"}],"replies":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/comments?post=23063"}],"version-history":[{"count":0,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/posts\/23063\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/media\/11424"}],"wp:attachment":[{"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/media?parent=23063"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/categories?post=23063"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/tags?post=23063"},{"taxonomy":"business_type","embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/business_type?post=23063"},{"taxonomy":"lilypad","embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/lilypad?post=23063"},{"taxonomy":"context","embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/context?post=23063"},{"taxonomy":"industry","embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/industry?post=23063"},{"taxonomy":"persona","embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/persona?post=23063"},{"taxonomy":"imagine_tag","embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/imagine_tag?post=23063"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/coauthors?post=23063"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}