PBIK Explained: What Employers Need to Know
What is the Payrolling of Benefits in Kind (PBIK)?
The UK Government has announced making the payrolling of benefits in kind (PBIK) mandatory for employers, meaning Income Tax and Class 1A National Insurance on benefits would be reported and paid via payroll rather than through P11D forms.
Originally planned for implementation from April 2026, this requirement has now been delayed until April 2027. The delay gives employers and payroll professionals additional time to prepare and adapt systems for the change, but there are advantages to going early - to avoid the rush next year!
The move supports the Government’s long-term goal of fully digitising how benefits are reported, and HM Revenue & Customs (HMRC) says that this change should make tax affairs simpler for up to three million employees by reducing the need for annual forms and contact with HMRC.
There is also an ambition to cut out up to four million end-of-year returns by making payrolling the standard way to report benefits. Before the new rules start, HMRC will consult stakeholders and publish draft legislation and guidance.
Will P11D Software Become Obsolete?
Many employers have already started voluntarily payrolling benefits in kind, as it can streamline operations and cut down administrative tasks. However, payrolling does present challenges for certain benefits.
Some benefits, such as company cars, are still complex to manage because payroll systems may not always have full, up-to-date data on vehicle use, emissions and fleet details in real time. Likewise, employer-provided loans above £10,000 can be tricky to calculate without accurate benefit data.
Therefore, although payroll software offers strong reporting tools, it may not always replace specialised P11D software or processes entirely. Payroll and benefits systems will continue to evolve to make managing these calculations easier.
Will Legislative Change Be Cost-Free?
No. Employers, HR and reward teams, and payroll partners will all need to invest time and resources to comply with the upcoming changes. That means software may need updating, processes will change, and businesses should budget for the cost of implementing the new requirements.
Does PBIK Mean Better Quality Data on Time?
We can hope so. Improved timeliness and accuracy of benefit data will help employers process payroll more confidently. But getting benefits data on time is still likely to require better co-ordination between payroll, HR and rewards teams.
Will P11D(b) Class 1A Reporting Still Happen in July?
There is some indication that Class 1A liabilities currently reported on P11D(b) forms each July might eventually move to real-time monthly reporting, similar to other payroll items. However, that change is not guaranteed yet, so employers will need to watch for updates.
What About Other Simplification Plans?
Alongside PBIK changes, other proposals aimed at simplifying employment law and pay, such as holiday entitlement reforms are also under discussion. While those may not be simple in practice, the aims are to simplify compliance for employers overall.
How SD Worx Can Support You
SD Worx has extensive experience supporting employers with flexible benefits, rewards and payroll solutions, including salary sacrifice and payrolling benefits. Our pay solution accommodates both modern payroll benefit reporting and legacy P11D processes.
Although P11D filing services are being withdrawn in April 2027, SD Worx can help employers who want to register with HMRC for payrolling in advance of the 2027/28 tax year. We can work with you to plan and implement your transition, including outlining costs, timelines and system requirements.
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
Need Help With Your PBIK Project?
For tailored advice and support, speak to the SD Worx Payroll Advisory Legislation Services (PALS) team today.
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