From April 2027, employers will need to report benefits in kind (BiKs) and expenses in real time through payroll software (rather than relying on traditional end-of-year reporting for many benefits). This is being introduced through interim guidance and draft legislation published by HM Revenue & Customs.
This matters because it turns benefits reporting into an “every pay cycle” compliance process — similar to PAYE and RTI — which increases the importance of:
- clean benefits data,
- consistent cut-off dates,
- accurate classification of benefits,
- and payroll software/workflows that can handle the new reporting approach.
What counts as a “benefit in kind” (BiK) in practice?
A BiK is a non-cash benefit provided to an employee that has a taxable value — common examples include:
- company cars and fuel benefit,
- private medical insurance,
- certain expenses and allowances,
- accommodation and employment-related loans (special handling applies).
The exact approach varies by benefit type, so employers typically need a structured way to:
- identify benefits provided,
- calculate taxable values correctly,
- feed those values into payroll consistently.
The key compliance message: preparation starts now
Even though the mandatory start is April 2027, the operational work (data, processes, software, training) takes time — especially if benefits data currently sits in separate systems (HR, Finance, fleet, insurance brokers).
GOV.UK guidance notes that employers will not need to register to payroll benefits from April 2027, but there are specific points on registration for certain items and the timeline for services going live.
Why this change increases risk for employers
1) More frequent reporting = less room for error
With real-time reporting, mistakes don’t wait until year end — they show up repeatedly across pay periods.
2) Benefits data is often messy
Benefits often originate outside payroll:
- Insurance renewals mid-year
- Leavers/joiners
- Benefit eligibility changes
- Salary sacrifice changes
- Pro-rating mistakes
3) Employee experience issues
Inaccurate benefits payrolling can cause:
- incorrect tax deductions,
- employee complaints,
- and rework during audits or reconciliations.
A practical “get-ready” checklist for 2026
Step 1: Build a benefits inventory
List every benefit and expense type you provide, including who owns it internally (HR/Finance/Payroll).
Step 2: Map your data sources
For each benefit, document:
- where the data comes from,
- when it becomes available,
- and what format it arrives in.
Step 3: Decide how values will be calculated
Some benefits require standard valuation methods and careful pro-rating rules. Your process needs to produce consistent figures each pay period.
Step 4: Confirm software readiness
Check whether your payroll system can:
- accept benefit values per pay period,
- apply the correct treatment,
- and support any required reporting outputs.
Step 5: Run a “shadow payroll” test
Before April 2027, many employers will test the workflow internally:
- run benefits calculations in parallel,
- validate employee-level tax impacts,
- and fix data issues early.
Step 6: Create internal cut-off dates
Payroll deadlines need benefits inputs on time — build a calendar and enforce it.
How payroll outsourcing helps you prepare for April 2027
Payroll outsourcing isn’t just “running payslips.” Done properly, it creates a controlled operating model that reduces compliance risk.
1) Process design and governance
Outsourced payroll teams typically set:
- standard cut-off dates,
- clear ownership for benefit inputs,
- validation checks (missing/duplicate benefits, leaver errors, pro-rating flags),
- and documented workflows (useful for audit readiness).
2) Data validation before reporting
Real-time benefits reporting is only as good as the data feeding payroll. A good outsourced provider will push for:
- consistent templates,
- approvals,
- and exception handling (e.g., backdated benefits, corrections).
3) Controlled reporting cadence
The operational benefit is repeatability: each pay cycle follows the same structure.
4) Reduced key-person risk
If one internal payroll expert leaves, benefits reporting can collapse. Outsourcing spreads knowledge across a team.
What payroll outsourcing does not replace
Even with outsourcing, employers still need to:
- decide which benefits to offer,
- maintain source systems (HR/Finance),
- approve benefit inputs,
- and resolve edge cases (policy decisions, benefit eligibility disputes).
Outsourcing works best when paired with a clear internal owner for benefits governance.
Internal links to add inside this article
Use these as contextual links (not a “link dump”) to strengthen SEO and guide users into your services:
- In the introduction (after explaining the April 2027 change):
“UK payroll services” → - In the “get-ready checklist” section:
“Understanding payroll processing in the UK” → - In the “Who is responsible for what?” / governance part:
“How to choose a payroll service” → - Optional cross-service link (for overseas companies hiring UK staff and wanting a full solution):
“Employer of Record (EOR) in the UK” →
Benefits-in-kind payrolling FAQ
Do employers need to register to payroll benefits from April 2027?
No registration is expected to be required for mandatory payrolling from April 2027, based on current guidance.
Are loans and accommodation treated differently?
Guidance indicates special registration handling for voluntary payrolling of employment-related loans and accommodation, with services planned to go live later (notably tied to the 2027–28 year).
What’s the biggest operational risk for employers?
Late or inaccurate benefit data feeding payroll (especially where benefits are managed outside payroll) — leading to incorrect employee tax and repeated reporting errors.
Can a payroll provider help even if HR/Finance owns the benefits?
Yes. Payroll outsourcing is most effective when it enforces templates, cut-offs, validations, and exception handling — while HR/Finance remains the source-of-truth owner.
When should preparation start?
Well before April 2027 — typically by building your benefits inventory and data map during 2026, then testing workflows before go-live.
