If you’re a contractor, you’re likely no stranger to navigating the complexities of tax and benefits. From April 2026, HMRC is introducing a significant change that will affect how benefits in kind (BIK) are reported and taxed. This article will guide you through what these changes mean for you and how you can prepare.

What Are Benefits in Kind?

Benefits in kind are non-cash perks provided by employers to employees. Common examples include company cars, medical insurance, and childcare vouchers. These benefits are taxable, and until now, they’ve been reported annually using P11D forms. However, HMRC is moving towards a more modern and streamlined approach by mandating their payrolling.

The New Mandate

From April 2026, most benefits in kind will need to be payrolled, meaning they’ll be taxed in real time through your payroll. This change aims to simplify the tax system and reduce administrative burdens. However, it’s crucial to understand how this will impact your financial situation.

How Will This Affect Contractors?

If you’re a contractor working through a limited company or an umbrella scheme, these changes could affect your net income and tax liabilities. Here are a few key points to consider:

• Increased Transparency: With BIK being payrolled, you’ll see the tax implications of your benefits more clearly on your payslip. This can help you better manage your finances.
• Potential Tax Increases: Depending on the benefits you receive, you might see an increase in tax deductions. It’s essential to review your current benefits and plan accordingly.
• Simplified Reporting: The new system eliminates the need for P11D forms, which should reduce paperwork and make tax compliance easier.

Strategies for Compliance

To ensure a smooth transition, follow these steps:

1. Understand the Benefits Being Payrolled:
   Familiarise yourself with the specific benefits that will be mandatorily payrolled. This includes company cars, medical insurance, and other common BIKs. Ensure you understand how these benefits will be taxed through your payroll.
2. Review Your Current Benefits:
   Take a close look at the benefits you currently receive and how they will be affected by the new rules. Consider whether any benefits should be adjusted or removed to minimise tax implications.
3. Communicate with Your Employer or Umbrella Company:
   Make sure your employer or umbrella company is prepared for the changes and understands their obligations. Discuss how these changes will affect your payslip and tax deductions.
4. Plan for Potential Tax Implications:
   Consider consulting a tax advisor to understand how the new rules might impact your personal tax situation. Plan for any potential increases in tax liabilities due to the real-time reporting of BIK.
5. Stay Informed:
   Keep up-to-date with HMRC guidance and any updates on the implementation process. Be prepared for potential changes in legislation or reporting requirements.

Conclusion

The mandatory payrolling of benefits in kind from April 2026 will require contractors to be proactive in understanding and adapting to these changes. By staying informed and planning ahead, you can ensure compliance and minimise any negative impacts on your financial situation.

Get Ahead of the Changes: Expert Support from Futurelink Group

At Futurelink Group, we specialise in providing comprehensive payroll solutions tailored to the needs of contractors. With 28 years of experience in managing UK and international payroll services, we ensure seamless compliance with HMRC regulations. Our services include umbrella PAYE, CIS, Gross Payment (GPS), and LTD options, designed to simplify your payroll administration and safeguard your employment status.

If you’re looking for expert guidance on navigating the new BIK rules or need assistance with your payroll, please feel free to speak to one of our consultants on 01923 277900 or visit our website to explore our services and discover how we can support you.