Benefit in Kind Rates 2026/2027 & Reporting Changes to 2027/28 Tax Year
HMRC are implementing significant changes to how Benefits in Kind are reported and taxed.
The UK’s mandatory Benefits in Kind (BIK) payrolling, requiring real-time reporting through payroll instead of year-end P11D forms, has been pushed back from April 2026 to April 2027, giving employers more time to prepare for this fundamental shift. This delay allows for adjustments to payroll systems for common benefits like company cars and private health insurance, though loans and accommodation benefits remain on P11Ds, with voluntary payrolling still an option for all.
Benefits in Kind (BIK) payments must be processed through the real-time full payment submissions (FPS). This is for all benefits except for accommodation and beneficial loans. For these two benefits, the P11D form will still be used.
Although BIK are being processed differently for 2027/28 tax year, the Class 1A National Insurance will still be reported annually via the P11D(b) form and paid by July deadline. The move for this is planned for April 2027.
The rates for each BIK have changed for the 2026/27 tax year, benefiting those with electric vehicles the most. The rates as follows:
Electric Cars – 4% of the cars value
Ultra-Low Emission Cars – 5% – 21% dependent on the CO2 emissions
Petrol/Diesel Cars – up to 37% based on CO2 emissions
Car Fuel Benefit Multiplier – the fixed multiplier increases to £29,200 for the 2026/27 tax year
For the other common benefits, the rates as follows:
Private Medical Insurance – the taxable value is the full premium cost paid by the employer
Company Vans – a flat rate of £4,170 applies
Homeworking expenses – although employees can no longer claim income tax deductions for household costs in 2026/27, they can still be reimbursed for eye tests, flu jabs, homeworking equipment and anything specific to the job role
Advice for employers:
Make sure you inform staff about the changes to how BIK are going to be processed, including how their payslips and net pay will be affected.
Make sure you check tax codes to make sure the employee is not being taxed twice on the same benefit
Calculate accurately and ensure the correct systems are in place for when it becomes mandatory
Whilst the 2027/28 tax year shows a significant shift in reporting BIKs, the transition in the long run should become more efficient in how the benefits are taxed.
HMRC are implementing significant changes to how Benefits in Kind are reported and taxed.
The UK’s mandatory Benefits in Kind (BIK) payrolling, requiring real-time reporting through payroll instead of year-end P11D forms, has been pushed back from April 2026 to April 2027, giving employers more time to prepare for this fundamental shift. This delay allows for adjustments to payroll systems for common benefits like company cars and private health insurance, though loans and accommodation benefits remain on P11Ds, with voluntary payrolling still an option for all.
Benefits in Kind (BIK) payments must be processed through the real-time full payment submissions (FPS). This is for all benefits except for accommodation and beneficial loans. For these two benefits, the P11D form will still be used.
Although BIK are being processed differently for 2027/28 tax year, the Class 1A National Insurance will still be reported annually via the P11D(b) form and paid by July deadline. The move for this is planned for April 2027.
The rates for each BIK have changed for the 2026/27 tax year, benefiting those with electric vehicles the most. The rates as follows:
Electric Cars – 4% of the cars value
Ultra-Low Emission Cars – 5% – 21% dependent on the CO2 emissions
Petrol/Diesel Cars – up to 37% based on CO2 emissions
Car Fuel Benefit Multiplier – the fixed multiplier increases to £29,200 for the 2026/27 tax year
For the other common benefits, the rates as follows:
Private Medical Insurance – the taxable value is the full premium cost paid by the employer
Company Vans – a flat rate of £4,170 applies
Homeworking expenses – although employees can no longer claim income tax deductions for household costs in 2026/27, they can still be reimbursed for eye tests, flu jabs, homeworking equipment and anything specific to the job role
Advice for employers:
Whilst the 2027/28 tax year shows a significant shift in reporting BIKs, the transition in the long run should become more efficient in how the benefits are taxed.