The government is taking steps to simplify and modernize parts of the tax system. They plan to use digital services to increase public sector productivity and are looking for more ways to make the tax system simpler and fairer.
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Mandating the payrolling of benefits in kind (PBIK)
Although originally announced for April 2026, the government is proposing to mandate the reporting and paying of Income Tax and Class 1A National Insurance Contributions (NICs) on benefits in kind via payroll from April 2027. This is to continue building on progress already made on the government’s ambition to fully digitalise the reporting of benefits in kind. Formal payrolling on a voluntary basis was first introduced in April 2016 and many employers and their employee have benefited.
Mandation is claimed as simplifying the tax affairs of 3 million people and reduce the need for them to contact HMRC!
They claim that this measure will make it easier for thousands of employers and HMRC by simplifying and digitizing the process of reporting and paying tax on all employment benefits. It will eliminate the need to submit 4 million end of year returns to HMRC.
The HMRC will talk to different stakeholders to discuss the ideas on the solution design in preparation for April 2027. They will publish more preparation information over the next months. They will also get help from experts to create guidance that will be available before the 2027 start.
The end of P11D software?
An increasing number of employers have indeed transitioned to Payrolling in recent years, a large additional tranche started in April 2025.
While this shift brings numerous benefits, such as streamlining processes and minimizing administrative burdens, it also presents challenges, particularly in obtaining accurate and timely data for certain benefits.
Payroll software has the capacity to manage various reporting requirements; however, it may not always serve as the primary source for benefit calculations.
Certain benefits, such as company cars, pose difficulties in obtaining real-time, precise fleet information. Moreover, calculating and predicting benefits, especially employer-provided loans exceeding £10,000, can be particularly complex. As the landscape continues to evolve, it remains to be seen whether P11D software or alternative solutions will be utilised to facilitate the calculation and upkeep of benefits. The ongoing advancement of payroll and benefits management systems will likely play a crucial role in addressing these challenges and refining the overall Payrolling process.
Is legislative change free?
It’s possible that the software will need some adjustments, while the data and procedures will need significant changes. The work on the project will involve the employer, their reward team, and partners, including their payroll service partners. Will all of them contribute their resources, time, and effort for free? Employers will need to allocate a budget for the changes, as there will obviously be additional costs.
Is this the end of tardy data?
We can wish! Employers and their reward partners may need to improve their timings in gaining accurate on-time information for payroll processing.
Is it the end of P11Db Class 1A each July
Well we can hope and there is a hint of it eventually. Class 1a liabilities for benefits which have to be reported on P11Db even where payrolled may transform to real time Class 1a required to be paid monthly. The intention is now to introduce real time Class 1A calculations on benefits from April 2027.
Other areas of ‘simplification’
The simplifying of holiday entitlement and pay proposed by the Department of Business and Trade (DBT) is far from simple. Hopefully these HMRC related items will be, however, Payrolling is not as simple as some would hope.
How Can SD Worx help?
SD Worx has a long legacy of providing support for flexible benefit and reward structures operated by employers. Whether payroll benefits or operating salary sacrifice arrangements, the pay solution supports both.
And SD Worx also offers P11D filing services – although this is the areas that is now being withdrawn in April 2027.
Payrolling Benefits In Kind (PBIK) was formally introduced as an employer option by HM Revenue and Customs commencing April 2016 and SD Worx pay solution was there from the beginning. Many of our customers had informally payrolled before.
Employers who register with HMRC prior to the start of the 2025/2026 tax year can PBIK now. The next window of opportunity is April 2026. You can engage with SD Worx for assistance with the transformation project, the fees for using the services and what is needed to implement PBIK within your payroll .
SD Worx also offer training on what payrolling is, how it works and what obligations an employer is under. See: SD Worx Academy training on PBIK.
