HMRC is scrapping a decade-old Benefit in Kind (BIK) reporting system, with millions of taxpayers warned there could be errors. From April 2027, the government's tax arm will reform the way benefits in kind are reported and tax is paid on them. Benefits in kind will be required to be reported through payroll software, with tax deducted in real time.
From April 2027, most employers who provide certain benefits in kind will no longer be able to report them after the end of the tax year. The affected benefits include medical benefits, company cars, vans, and car and van fuel. Employers will be required to calculate Income Tax and Class 1A National Insurance contributions due in real time and report these benefits in kind through Real Time Information (RTI) via payroll software.
What Changes from April 2027 and 2028
From April 2028, most remaining benefits in kind, except for employer-provided loans and accommodation, will be mandated to be payrolled. The reform is designed to close the gap between when tax is owed and when it is paid, but it also demands far greater accuracy, in-year data quality, and technical understanding than the current system.
The Chartered Institute of Payroll Professionals (CIPP) is warning that employers who do not have qualified payroll professionals in place risk miscalculating tax and National Insurance contributions from day one. Mathew Akrigg, Policy and Advisory Leader at the CIPP, said: “While the change is designed to close the gap between when tax is owed and when it’s paid, it also demands far greater accuracy, in-year data quality and technical understanding than the current system – placing pressure on payroll teams to get it right immediately, not retrospectively.”
Concerns Over Errors and Employee Impact
Akrigg added: “This is the biggest shake up to tax on employee benefits in a decade and we are concerned that – without qualified, experienced payroll professionals overseeing it, there will undoubtedly be errors which will see employees paying the wrong amount of tax on their benefits, without them realizing it.”
The CIPP's warning highlights the risk that millions of employees could be over or under-taxed if employers fail to adapt. The best way to avoid that, according to Akrigg, is to ensure businesses have trained payroll experts in place who act as the safeguard preventing employees from being over or under-taxed.
