In 2026, real-time reporting will begin for benefits in kind

Beginning April 2026, the government plans to require real-time reporting for most benefits in Kind (BiKs).

BiKs, which are non-cash benefits like company cars or private medical insurance offered by employers, were traditionally reported annually.

The new requirement published today after the Budget aims to simplify taxes and national insurance payments. It ensures that employees receive benefits taxed more accurately, and according to their real value, when they are received.

Employers will benefit from the new system as it reduces the administrative burden of annual reporting and helps to avoid errors that could lead to unanticipated tax liabilities or refund delay. Real-time reporting improves employee understanding of tax deductions as adjustments will be shown on their payslips monthly rather than only once a year.

The reform supports HM Revenue and Customs’ ambition to digitise and update the tax system. It will bring tax processes into line with real-time financial reports.

Two types of benefits will remain optional at first – employer-provided housing and employment-related loans.

HMRC stated that this phased approach gives employers and payroll software suppliers time to adapt and integrate these elements.

Employers will calculate the value monthly of BiKs under the new system to accurately reflect the benefits within each payroll cycle.

If, for example, an employee’s BiK fluctuates, or a benefit is terminated mid-year by the payroll system, adjustments are made in real time. This method is intended to increase accuracy and reduce the need to perform end-of-year tax reconciliations that can cause confusion and delays for employees and employers.

BiKs are calculated according to existing rules. However, employers must ensure that their payroll software is capable of handling these real-time updates. Employers can also correct miscalculations during the tax year rather than waiting for the end of the fiscal year to reconcile discrepancies.

HMRC stated in its policy document today: “This will prevent four million people having their income taxes collected in arrears, which will mean that they pay the correct tax at the time.

It will make it easier for employees to know what taxes they pay, as the information will be more accurate. For

HMRC,

It will reduce the pressure placed on our service by removing four million returns at the end of each year.”

HMRC stated that payroll software providers would play a key role in the success or failure of this initiative. It aims to publish technical specifications by mid-2025 to help software providers ensure that their products can support real-time BiK reporting. They will also include guidelines for calculating BiKs and managing tax and NI payments, as well as making adjustments when necessary.

HMRC will offer updated guidance, and perhaps training materials to help employers adapt to the new system. The government will also be seeking feedback from employers, payroll providers and other stakeholders to identify potential challenges or areas that require clarification. The change may require employers to make adjustments to their payroll and processes, but should lead to a more efficient approach to employee benefits management and tax obligations.

In the months before April 2026, the government will continue to provide updates and details about the new BiK reporting obligations. HMRC will continue consultations with stakeholders as employers and software providers prepare to implement these changes.

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