What the new BiK software specifications mean for UK employers

HM Revenue and Customs has recently published new software specifications designed to support mandatory payrolling of Benefits in Kind. This represents a significant change for employers managing payroll and benefits.

While the technical specifications are mainly aimed at software developers, they give a clear insight into what employers need to prepare for, especially those that currently offer benefits such as company cars, private medical insurance or fuel cards.

What is changing

Benefits in Kind and certain employment related expenses will now need to be reported through the standard payroll system using the regular Real Time Information Full Payment Submission rather than separate end of year forms.

Payroll software will need to support many more data fields to match what was previously reported on P11D and P11D(b) forms. This allows HM Revenue and Customs to collect tax and Class 1A National Insurance in real time.

For benefits where the cash equivalent is not known at the start of the tax year, employers must estimate reasonably and adjust taxable amounts as values change during the year.

If the taxable value changes during the year, for example where benefit entitlement changes, payroll must be updated accordingly for the remaining pay periods.

In simple terms, the reporting of benefits will now become part of regular payroll routines instead of being handled separately at the end of the year.

What this means for employers and payroll teams

More complexity in payroll administration 
The amount of data required will increase significantly. Employers must ensure their payroll software and internal processes can handle the additional information and calculations.

Greater need for accurate record keeping and estimates 
Where benefit values vary or are not known in advance, employers must maintain clear records and apply reasonable estimates so tax and National Insurance are applied correctly.

Potential impact on employee take home pay 
As benefits are taxed through payroll rather than adjusted at year end, employees may see changes to their net pay during the year, particularly where benefit values are high.

Importance of clear communication with employees 
Employees will need to understand how their benefits are being taxed and why their take home pay may change.

What employers should be doing now

Review whether your current payroll software supports the new specifications. If not, consider upgrading to a compliant solution.

Prepare internal processes to collect and maintain additional benefit related data, including estimates where required.

Update staff communications and payslip formats so benefit taxation is clearly explained.

Train payroll and HR teams so they understand the new requirements and can apply them correctly.

Plan carefully for the first year of compliance, including the impact on payroll tax, National Insurance and employee cash flow.

What this means for your payroll provider

As benefits reporting becomes more complex, many businesses will increasingly rely on professional payroll providers for support. A proactive provider will ensure software readiness, data accuracy and full compliance.

At Pecunia Pro, we support businesses through changing payroll legislation, including benefit reporting and payroll software compliance, so you can remain confident and protected.