What does HMRC’s new benefit in kind reporting mean for your payroll system?
HM Revenue & Customs (HMRC) is introducing real-time reporting for benefits in kind (BiKs) starting in April 2026, meaning businesses must prepare for changes in how they manage payroll.
These updates aim to streamline tax reporting but bring new challenges and opportunities for employers.
The key changes
Under the new rules, businesses must report most BiKs, such as private medical insurance and company cars, in real-time through their payroll software.
The days of relying solely on end-of-year forms like P11D are numbered, as these will no longer cover the majority of BiK reporting.
However, there are exceptions.
Reporting of employment-related loans and accommodation will remain voluntary for now, with businesses able to use a modified P11D and P11D(b) if they prefer not to report these items in real-time.
For businesses operating company car schemes, the traditional P46 (Car) forms will be scrapped, with payroll software taking on the task of real-time reporting.
The impact on payroll systems
These changes mean payroll systems must evolve to handle more detailed and accurate reporting throughout the year.
Employers will need to ensure their software is up-to-date and capable of meeting these requirements.
Real-time reporting demands precise data entry, which increases the risk of errors if processes are not carefully managed.
An end-of-year process will still exist to amend taxable values of certain BiKs that cannot be determined during the tax year, but the emphasis will be on accuracy from the outset.
What should businesses do?
- Update payroll software – Check with your software provider to confirm their system will support the new BiK reporting requirements.
- Train your team – Ensure your payroll team understands how to input BiK data accurately and in line with the new rules.
- Review your BiK offering – Take this opportunity to audit your BiK packages to ensure they remain competitive and compliant.
- Prepare for the end-of-year process – Develop a plan to review and amend any BiK values that can’t be finalised in real-time.
While these changes may feel daunting, they also represent an opportunity for businesses to modernise their payroll processes and improve compliance.
Real-time reporting could reduce the admin work required for year-end submissions, making tax reporting more efficient overall.
Is your business ready for the change to real-time BiK reporting?
If you need support updating your payroll system or advice on managing these changes, our team of tax and payroll experts is here to help. Get in touch today.
