What is the background?
Most employers use P11Ds to report taxable benefits to HMRC. From April 2016, voluntary payrolling of benefits was introduced to help reduce the number of P11Ds and speed up tax collection. Some employers use this voluntary process and payroll their benefits in kind rather than produce P11Ds, although most still use P11Ds.
What is the issue?
Our Insight in September 2024 highlighted the introduction of compulsory PBIK which was due to be introduced in April 2026.
That has now been delayed until April 2027.
This means that from 6 April 2027 PBIK, is to become compulsory, although it will still not be possible to include living accommodation or beneficial loans.
In summary, employers will now need to follow the timetable below:
| Tax Year | Reporting Method to be used |
| 2024/25 | P11D form or voluntary PBIK – tax liabilities will be collected via tax codes |
| 2025/26 | P11D form or voluntary PBIK – tax liabilities will be collected via tax codes |
| 2026/27 | P11D form or voluntary PBIK – tax liabilities will be collected via tax codes |
| 2027/28 | Mandatory PBIK – employers will need to collect the tax due through payroll adjustments per pay period |
What do employers need to consider?
Pushing the start date back 12 months gives employers more time to prepare for this major change. Any employers that are not currently payrolling their benefits will need to review their benefits to ensure they are ready for the change and have a plan of action for implementation of the change.
Additional guidance was published this week relating to some of the technical points around PBIK with some further announcements as to when we expect more information.
In particular, it appears that P11D forms will still remain in some form after 2027/28 in limited special circumstances, such as for loans and accommodation and possibly globally mobile employees.
What do employers need to do now?
As communication will be key to a successful implementation of PBIK, employers should plan any necessary updates ahead of the revised implementation date. It also provides an opportunity to train payroll and HR teams on the forthcoming changes and to consider early adoption where appropriate.
In particular, communication is vital for employees, payroll teams/outsourced providers and any third party providers of benefits, such as fleet providers and medical insurance companies.
Can employers still voluntarily PBIK?
Although the new rules do not apply until 6 April 2027, it is still possible to voluntarily payroll benefits for 2026/27. We have experienced a few employers who have done so, to test their processes earlier than the move toward mandatory payrolling.
For those employers who want to avoid the “benefits crush”, we recommend that they look to voluntarily payroll their benefits from April 2026.
Employers will need to let HMRC know they wish to payroll benefits in good time before the 5 April deadline, to enable timely communications to be provided to employees and minimize tax code adjustments. We recommend that employers looking to payroll benefits for the 2026/27 tax year progress their changes between now and December 2025.
How can UNW help?
Preparation and communication are key to successful implementation. Our employment tax specialists have expertise in implementing voluntary PBIK arrangements.
When we advise and support our clients with their implementation, we typically proceed as follows:
- Obtain details of all benefits provided;
- Establish the process for obtaining the data to calculate each benefit;
- Meet with relevant stakeholders to clarify any points;
- Agree a plan of action and timetable for implementation; and
- Communicate the change to employees (often via in-house presentations).
If you would like to discuss what this change could mean for your business or need support preparing for the new reporting rules, please get in touch with a member of our Employment Taxes team.
