Early preparation vital for ensuring businesses are ready to payroll Benefits in Kind, advise leading accounting firm

Understanding and adapting to the upcoming changes to payrolling Benefits in Kind (BIK) will require extensive planning, according to Prime Accountants, a leading accounting firm in the West Midlands.

While it was previously announced that most BIKs would be payrolled from April 2027, a new phased approach now means that many will not be brought in until April 2028.

As such, only the following BIKs will need to be payrolled from 2027:

• Company cars and car fuel
• Company vans and van fuel
• Employer-provided medical benefits

From this date, Income Tax and employer National Insurance Contributions (NICs) on these benefits must be paid using the same real-time system as the rest of PAYE.

Paislei Godley, Director at Prime Accountants, has highlighted that there are some compliance risks that could catch businesses off guard.

“Even with the phased approach to payrolling BIKs, it is still necessary for businesses to register before April,” Paislei said. “There has been some confusion for businesses about what to do and when, so we want to make sure the next steps are clear.”

Seeking expert accounting support is likely the most effective way of handling the changes, as this can ensure that businesses are compliant with the new regulations.

However, the changes are worth the hassle and should be beneficial in the long run.

“The changes should be a significant win for employees who will no longer face a heavy tax burden once all of their BIKs have been calculated.

“By paying the tax owed as it is incurred, it will be more manageable and should provide a better stream of cash flow for HMRC.”

While Prime Accountants understands the initial challenges that businesses may face, it predicts that the system will feel intuitive once it has been in place for some time.

Payroll Senior Manager at Prime Accountants, Martin Farrell, added: “Employers who get ahead of the changes and adapt early will be better positioned to make the most of this new system.

“The current way things work often involves year-end adjustments that can see employees get annoyed when they suddenly have less money than they were expecting.

“Getting started is going to be the hardest part and we are happy to help you clear these initial hurdles so that you hit the ground running in April.”

While there is not a specific set of penalties tied to payrolling BIKs, failure to adapt to the new system may trigger an HMRC investigation.

“Employees are not going to be particularly happy if employers make mistakes with BIKs or any aspect of payroll,” Martin said. “But failure to comply will see HMRC take an in-depth look at your accounts, something that could see penalties and interest being charged if it finds issues.”

There is still time to get everything in place before the first phase takes effect, but businesses should not wait too long to get started.

Prime Accountants is on hand to support the transition and assist with payrolling even once the new way of handling BIKs is familiar.

The firm can also assist with communicating to employees the new system so that they better understand the differences in their payslips going forward.