HM Revenue & Customs (HMRC) is set to overhaul benefit in kind (BiK) reporting, introducing real-time obligations from April 2026.
This change will demand updates to payroll systems and processes for business owners.
While the goal is to streamline tax administration, these changes bring both challenges and opportunities.
Key changes
Under the new rules, most BiKs, such as private medical insurance and company cars, must be reported in real-time through payroll software.
The reliance on end-of-year forms like the P11D will largely be phased out.
However, not all benefits are transitioning immediately. Employment-related loans and accommodation will remain optional for real-time reporting, with businesses able to stick to a modified P11D for these items if preferred.
For businesses managing company car schemes, the traditional P46 (Car) form will also be scrapped, with payroll software taking over this reporting responsibility.
Why the change?
HMRC aims to address inefficiencies in the current system.
End-of-year reporting has often resulted in delays, inaccuracies, and increased administrative burden.
Real-time reporting should provide greater transparency and accuracy for both employers and HMRC.
However, implementing real-time reporting is no small feat.
Businesses will need to invest in updated payroll systems and ensure their teams are equipped to handle more detailed and frequent reporting requirements.
Implications for payroll systems
The move to real-time reporting means payroll systems must evolve to handle continuous updates with precision.
Employers will need to ensure their payroll software supports real-time BiK reporting, train payroll staff to input and manage BiK data accurately throughout the year, and develop processes to minimise errors, as real-time reporting demands greater accuracy upfront. While some adjustments will still be possible at year-end, the emphasis will shift to ensuring accurate reporting from the outset.
How should businesses prepare?
As the 2026 deadline approaches, business owners should focus on several key areas to ensure they are prepared for the changes.
First, update your payroll software by confirming with your provider that it is equipped to handle the new real-time reporting requirements.
Next, invest in training your team to ensure they fully understand the nuances of real-time BiK reporting and are ready to manage the transition smoothly.
Additionally, take this opportunity to review your benefits in kind offerings by auditing your packages to ensure they remain both competitive and compliant.
Finally, develop a plan for managing year-end adjustments, as some BiK values may still require amendments after the tax year ends.
Challenges or opportunities?
While these changes might feel like another administrative hurdle, they represent an opportunity to modernise payroll processes.
Real-time reporting could reduce the workload associated with end-of-year submissions, improving efficiency and compliance.
The key is preparation. Businesses that adapt early will be well-positioned to manage the transition smoothly.
If you are unsure how these changes might affect your business or need support in updating your payroll systems, our team of tax and payroll experts is here to help. Contact us today.