Do you want to offer employee benefits? What you need to know about payrolling Benefits in Kind (BiK)

It is getting more competitive than ever to attract and retain talent, especially for law firms where skilled staff are in high demand.

Salary alone is no longer the only thing employees consider when looking at companies.

Many firms may start to consider Benefits in Kind (BiK) to help them stand out as an employer and reward their teams.

BiK can be a simple and tax-efficient way to offer meaningful extras, but they must be payrolled correctly.

Why do firms use BiK?

BiK are a non-cash benefit provided to employees on top of their salary.

This can include:

• Private medical insurance
• Company cars or fuel
• Mobile phones or laptops for personal use
• Gym memberships
• Interest-free or low-interest loans

If your firm does not have much flexibility around pay rises and bonuses, BiK can offer an alternative way to improve reward packages.

These benefits can help firms support employee wellbeing and retention and show your investment in your team.

Although these benefits are not paid as cash, they are usually taxable and subject to National Insurance contributions. This is where payrolling becomes particularly useful.

What does payrolling BiK mean?

Payrolling BiK means taxing the value of the benefit through the employee’s payroll, rather than reporting it on a P11D at the end of the tax year.

The tax is collected in real time and spread across the year, which can be clearer and more manageable for employees.

To payroll benefits, employers must register with HMRC before the start of the tax year in which the benefits will be provided.

The taxable value of the benefit will then be included in the employee’s pay and the appropriate tax will be deducted through PAYE.

How do you payroll BiK?

When you payroll BiK, you must value the benefit accurately and divide the taxable amount across the payroll period.

Payrolling removes the need to submit P11Ds for those benefits, but employers must still submit a P11D(b) to report and pay Class 1A NICs.

Clear communication with your employee is also essential so that they understand how this affects their take-home pay.

How can we help you stay compliant?

From April 2027, all BiK will need to be payrolled and employers who delay preparations will risk reporting backlogs and inaccurate tax calculations when the deadlines arrive.

Also, errors in valuation and late registration can result in penalties and potentially unhappy employees.

Firms must keep accurate records and ensure their payroll systems are set up correctly to handle BiK.

Our expert team can help you implement and manage payroll benefits and support you when registering your benefits with HMRC.

We can help model the costs and manage Class 1A NIC liabilities so that you can make informed decisions before introducing BiK.

With the right professional support, BiK can help improve your reward packages without adding unnecessary risk or complexity.

For further advice on managing your payroll, contact our dedicated payroll team, MT Pay, today.