Are you ready for monthly Benefits in Kind reporting?

Major changes in the world of employee benefits admin! We’ve known for a while now that the way Benefits in Kind (BIK) are reported through payroll is set to change.

The change was originally set for April this year, but it’s been put back to April 2027 to allow businesses more time to get ready.

Basically, it means that instead of reporting Benefits in Kind once a year, employers must report through payroll in real time.

Let’s look at this in change in more detail and what it means for businesses…

If you’d like a free review of your current benefits then call our friendly brokers on 01273 222805 or hello@hoorayinsurance.co.uk.

What’s changing?

Benefits in Kind are company-paid employee benefits that have a cash value, like Group Private Medical Insurance. Staff are required to pay tax on the value of the benefit they receive (although some benefits are excepted).

Businesses currently have the option of reporting Benefits in Kind yearly via a P11D tax form. But from April 2027 they will have to make these reports every month through payroll.

Hooray’s Head of UK Employee Benefits, Mike Hesch, recently joined experts at Zelt and RORA to discuss these changes in more detail. You can watch the full webinar here: How to modernise benefits & payroll for real-time reporting

What benefits are affected?

Mike provides a general rule of thumb for working out what counts as a Benefit in Kind.

“You can think of a Benefit in Kind as any employee benefit that directly benefits the employee in question and has a monetary value. Does private health insurance directly benefit the employee? Yes it does, therefore it’s a Benefit in Kind. Does life insurance directly benefit them? No, it only benefits their family in the event of their death, so it doesn’t count as a Benefit in Kind – although there can be exceptions depending on how it’s structured.”

To muddy the picture further, some Benefits in Kind have special tax exemptions.

Taxable Benefits in Kind:

The following are normally taxable::

• Group Private Health Insurance
• Group Health Cash Plans
• Group Critical Illness Cover (unless it’s placed in a trust)
• Company cars
• Accommodation
• Non-cash gifts and vouchers (over a certain value)

Exempt Benefits in Kind:

These benefits are usually exempt from BIK tax:

• Employee Assistance Programmes (generally speaking it’s exempt, but it must be made available to all staff and, if extended to friends and family, it must be restricted to issues that affect the employee)
• Group Income Protection
• Pension contributions
• Business travel expenses
• Work-related training

Remember, we’re not tax experts and this information is only provided to give you a general idea of how Benefits in Kind work. Always speak to a qualified tax professional to be certain.

Why businesses should get their employee benefits in order now

“If you’re having to make changes to your payroll relating to your benefits then now is the time to review whether those benefits are right for you and your employees moving forward,” said Mike.

Now would be a good time to review opportunities to:

• Better manage costs and save money
• Reduce time spent managing employee benefits
• Upgrade benefits where possible and help reduce absenteeism and staff turnover

“Survey your staff, look at your demographics, and most importantly benchmark yourselves against your peers. What do they offer? It’s obviously important to compare well against your competitors so you can attract the best talent.”

“But it’s also important to communicate to staff about the different benefits they have in place. Make them aware of the full raft of benefits they have, and how they can access them.”

Getting it right matters. Fourty-seven per cent of UK employees said that a good employee benefits package is the most important thing they look for in employments, according to a survey by Zest.

Need help benchmarking your benefits against other companies in your industry? Contact our friendly advisers via 01273 222805 or hello@hoorayinsurance.co.uk for straightforward, honest advice.

How can insurers help you during this change?

Having the right platforms in place can help smooth the transition to real-time benefits reporting, but insurers also have an important role to play.

“In private medical insurance some providers don’t offer true monthly reconciliation,” said Mike.  “Many just divide the annual premium by twelve and charge that monthly, not taking into account joiners and leavers. Those providers that are ahead of the game currently and do true monthly reconciliation are Bupa, Vitality and AXA.”

“In addition, Bupa and Vitality have good online employer zones that allow advisors and clients to view and download monthly bills, rather than waiting on an email being sent.

“Other providers will be following suit as more clients start to request a proper monthly reconciliation to help keep the change to monthly BIK easy to administer.

“But I expect that some providers will require a complete system overhaul and therefore will not be ready in time even for next year.”

Let’s get ready…

Businesses have until April 2027 to get ready for monthly reporting. Now’s the time to start putting the right systems in place to ensure the transition goes smoothly.

It will also be important to tell staff about these changes as they will see the deductions in their monthly payslip instead of once a year via a P11D.

Make sure they don’t get spooked!

If you need to review your current benefits, then give Hooray Health & Protection a call. We compare pricing across the market, ensuring you get the right benefits at the right place. We’ll also help onboard staff and assist with associated admin through the life of your policy – with no fees in sight.

Call 01273 222805 or email hello@hoorayinsurance.co.uk for a no-obligation chat.