WFM UK | Payroll UK: Coming Soon: Our New BIK Module for Payrolling Benefits in Kind

Introduction

While payrolling benefits has been possible with HMRC for several years, from 6th April 2026, the Fourth Payroll system will support payrolling employee benefits through PAYE, giving you a full year to adopt the approach ahead of the mandatory requirement from April 2027.

To support employers ahead of the upcoming changes, our new BIK (Benefits in Kind) module is planned for release at the end of February 2026. This will allow the whole of March for configuration, internal preparation, and readiness for the 2026/27 tax year.

This first iteration of the BIK module provides everything required to payroll benefits for income tax purposes, offering confidence and compliance from day one. Throughout 2026 and into Q1 2027, we will continue to enhance the module, expanding features, adding automation, and preparing for the full legislative shift in 2027.

The initial launch will not yet include automated handling for National Insurance contributions. 

These elements will be delivered in subsequent iterations of the BIK module:

Class 1A NIC (Employer Only)

• A dedicated Class 1A NIC solution will be developed and delivered ahead of the end of the 2026/27 tax year. This will allow employers to complete the annual Class 1A due on benefits process, submit the P11D(b) to HMRC, and make the necessary payment for that year for the 6th July 2027 deadline

Class 1 NIC (Employer & Employee)

• Certain benefits (where some may even be considered as expenses) attract Class 1 NIC. A solution for handling these cases is being planned for the first enhancement phase of the BIK module, following the initial release. This will support the required NIC calculations and payroll actions, to automate as much of the process as possible

• Until this feature becomes available, employers will need to manage the Class 1 NIC liability on such benefits manually within payroll (such as using a National Insurance only Payment Type + offset)

Your April 2026 Decision

This article is being shared now to give employers an early start in deciding whether to adopt payrolling of benefits from April 2026. Comprehensive guides including configuration steps, best practices, and example workflows will be published over the coming months, as well as a webinar to further assist in making the decision.

Contents

• Introduction
• Your April 2026 Decision
• Included in the BIK Module
  • Company Benefits Configuration
    • Supported Benefits
    • Benefit Groups
  • Vehicle Management
  • Employee Benefit Configuration
  • Application to Payroll module
  • Employee Communications
    • Pre Tax Year Notification
    • Document Tracking
    • Employee Documents
  • User Access Controls
  • Data Imports
  • BIK module Reporting
  • Looking Ahead

Included in the BIK Module

Company Benefits Configuration

The 'Company Benefits' area is the foundation for payrolling benefits in the system. It includes every HMRC-defined benefit that can be payrolled for income tax purposes, and gives organisations a central place to activate, configure, and control how each benefit is handled.

Rather than simply presenting a list of benefit types, the module guides users into selecting the settings that drive accurate tax treatment. Each benefit can be enabled at company level, with clear visibility of how it should be calculated and how it interacts with payroll, and which HMRC rules apply. This helps remove the guesswork that often leads to inconsistent or incorrect benefit reporting.

For benefits that can arise through more than one scenario, users can choose the correct HMRC event type. This step matters more than most teams realise. Different scenarios within the same benefit type can attract different liabilities, affect the taxable value, or determine whether income tax, NIC, or both apply. The module gives users a structured way to select the right event type so that the correct liabilities flow through payroll without manual intervention.

Supported benefit types:

Please Note: 

• For Tax & NIC Liability, “Immediate” indicates that the full value of the benefit will be applied, in full, in the next available payroll run, rather than being spread across the tax year (as with “Payrolled”) or processed via a P11D(b) for Class 1A NIC
• For Event Types, “Automatically Handled” means that the benefit type has a single treatment route and therefore does not require the selection of an event type
• Please refer back to the start of this article concerning the current position on National Insurance handling

Please note: The "Other" benefit type category has been expanded to allow flexibility on different tax and NIC liability requirements.

Benefit Groups

Benefit Groups let employers define which benefits are available to which employees, using criteria such as job title, location or contract type. Once set up, users configuring benefits for employees only see the benefits they are eligible for, and anything outside their criteria is hidden from selection.

The function is simply to reduce mistakes, enforce entitlement rules and prevent incorrect benefit assignments from flowing into payroll and tax calculations.

Vehicle Management

The 'Vehicle Management' area holds all data required for accurate car benefit calculations, including make and model, list price and accessories, CO2 emissions, fuel type, registration details, and other HMRC-relevant fields. Users will be able to enter and maintain this information manually.

The module applies the validation needed to keep calculations accurate. Car records can only be assigned to one employee at a time, which prevents duplicate use of a single vehicle and avoids incorrect benefit values. Van records follow a different rule set, allowing shared usage where appropriate while still meeting HMRC expectations.

A future iteration of the module has a scoped integration with the DVLA API, which will reduce manual entry and improve data accuracy. That integration will be delivered as part of the ongoing enhancements to the BIK module over 2026 and early 2027.

Employee Benefit Configuration

At employee level, users can assign any benefit that has been configured at company level, provided the employee belongs to that company and meets the criteria defined by Benefit Groups in place (if any).

Once a benefit is assigned, users can enter the benefit value, record any employee contributions and set the date range that defines the period of charge. These inputs drive the cash equivalent calculation that flows into payroll.

Note: Employers should normally enter the annual benefit value and allow the date range to drive any pro rata calculation. If a provider supplies a pre-pro-rated cost, use that figure instead, but keep the date range set to the full tax year.

For most benefit types, this is presented through a simple interface that covers the essentials. More tailored enhancements for individual benefits will be delivered through 2026 and early 2027.

Car and car fuel benefits are treated differently. Their calculation rules are more complex, so they already have a dedicated interface that handles the vehicle record, assignment, contributions and pro rating in a structured way. This avoids manual workarounds and produces the correct taxable values without extra processing.

Application to the Payroll module

Once benefits are configured in the BIK module, the system automatically feeds the relevant tax liability into payroll as notional payments. These entries increase an employee’s taxable pay for tax and (after enhancements during 2026/2027) National Insurance purposes while never generating an actual payment.

This gives payroll a clean, auditable record of how each benefit affects taxable earnings, avoids manual adjustments and ensures that chargeable benefits are always reflected in the correct period.

These notional payments appear everywhere payroll users expect to see them, including payroll summaries, payroll preview screens, employee payslips (on ESS & PDF files) and any reports or exports that output taxable pay. This includes the Full Payment Submission (FPS), updated to include the necessary BIK data items, allowing employers to report payrolled benefits to HMRC in line with regulatory requirements. 

The result is a consistent end-to-end flow from benefit configuration to payroll processing with no separate reconciliation work needed.

Payrolling Benefits Calculation Example:

• Annual Benefit Value (Cash Equivalent): £1,200

• Employee Pay Frequency: Monthly (12 periods)

• Calculation: £1,200 ÷ 12 = £100 per month

Each month, £100 is added to the employee’s taxable pay as a notional payment, increasing income tax liability without affecting actual cash pay.

Note: This is a simplified example. Future user guides will cover more complex scenarios, including employee contributions, partial-year benefits, and other adjustments.

Employee Communications

The BIK module includes a set of tools to support communication with employees about payrolled benefits. While still evolving, these features provide employers with a structured way to manage notifications, track documents, and give employees visibility of the benefits affecting their pay.

Pre-Tax Year Notification

Employers can upload a Word template to create a Pre-Tax Year Notification, designed to help employees understand the transition from P11Ds to payrolled benefits. The system supports mail merging to automatically include employee-specific data. This notification is triggered as soon as the first benefit is applied to an employee, so it is important that a template is uploaded before any benefits are assigned. This will also provide notification to new starters employed during the tax year.

This is an initial placeholder function to assist with the transition. Over 2026/2027, Fourth will enhance this area to include broader communication handling, available employee communications, such as notifications confirming that the employer is payrolling benefits and the end-of-year Payrolled Benefits Summary, which will break down what was payrolled and how much tax was applied.

Document Tracking

Available under each company, a central 'Document Tracking' area allows employers to see what has been sent, to whom, and when. It also highlights documents due to be sent. Currently, this functionality applies to the Pre-Tax Year Notification, but it provides a foundation for tracking future communications. Documents can be reviewed directly from this area for full transparency.

Employee Documents

Within each employee’s BIK record, there is an 'Employee Documents' section. This shows all documents sent for that employee, giving users with access clear visibility of communications related to benefits. These documents will also be available to the employee in Employee Self Service (ESS).

User Access Controls

User Access Controls define who can do what tasks in the BIK module. The BIK module continues with the wider system permission-based control by allowing administrators to grant access at a granular level, covering areas such as (but not limited to): 

• Company-level benefit configuration

• Vehicle management

• Assigning benefits to employees

• Managing employee notifications and communication templates

• Viewing or editing employee-level BIK details

• Document tracking and audit review

All existing system permissions, access roles and the portal hierarchy remain in force. The BIK module builds on that framework rather than replacing it. Users will only see or act on BIK features if their core role gives them access to the relevant employees or organisational units. This prevents cross-company visibility, avoids accidental access to restricted records, and ensures BIK permissions sit cleanly inside your established governance model.

Data Imports

The 'Data Imports' area exists for one purpose: to move organisations from setup to operational use whilst minimising slow, manual entry. The first iteration of the BIK module includes several targeted imports covering the core data sets needed to begin payrolling benefits.

At launch, employers can bulk upload:

• Vehicle records

• Employee benefit assignments excluding car benefits

• Employee car and car fuel benefit records through a dedicated import

• Company benefit configuration

These imports allow customers to migrate data from legacy processes or external providers and establish a clean baseline before payrolling begins. They also reduce the risk of inconsistent setup that often appears when data is keyed manually across large populations.

This is a starter set. The import framework will expand over the 2026 and 2027 iterations, with priorities shaped heavily by customer feedback. The direction is simple: more coverage and fewer manual touchpoints.

BIK module Reporting

Reporting within the BIK module is built on an enhanced version of our custom reporting framework. Instead of relying on a long list of predefined reports, customers gain the ability to shape their own outputs and design reports that match how their organisation actually manages and analyses benefit data.

Instead of waiting for a catalogue of predefined reports, the custom reporting engine acts as the primary way to build the BIK insights you need. The model gives users full control to select fields, create layouts, apply filters and produce outputs that reflect their own processes. This avoids the usual lag between a new module launching and a full library of fixed reports becoming available, and gives organisations the flexibility to design reporting that actually fits how they manage benefits in practice.

This approach gives customers control and avoids the usual bottleneck of waiting for bespoke reports to be built. It also means the first iteration of BIK reporting is intentionally flexible rather than comprehensive.

Customer feedback will guide which predefined reports are added in later iterations. Where clear demand emerges, we will prioritise additional standard outputs and provide ready-to-use templates within the custom reporting tool to accelerate adoption.

There are no screenshots included here as the interface is still progressing through development and testing. The structure is confirmed, but the visuals are not yet final.

Looking Ahead

The version for the 2026 to 2027 tax year forms the foundation of the BIK module. It provides everything required to begin payrolling benefits in a structured and compliant way, but it is only the starting point. The module will continue to develop through 2026 and into early 2027 as employers prepare for mandated payrolling.

The next phases will focus on closing the remaining gaps around National Insurance, expanding employee communication features, strengthening automation and improving the end-to-end setup experience for more complex benefits. The intention is to remove manual work and reduce the risk of configuration errors.

Functionality for PAYE Settlement Agreements will also be introduced well before the end of the 2026 to 2027 tax year. Employers operating PSAs can simply continue as they are and configure the relevant benefits once the PSA tools are live. The module will allow PSA items to be captured cleanly and support the year-end requirements without retrofitting or rework.

Customers will also see enhanced calculation logic and tailored user interfaces for specific benefit types. Mileage allowance is a good example. The long-term intention is to move away from generic data entry and provide guided, automated calculations and screens that match the rules of each benefit type. This will extend to other benefits where the standard UI is not sufficient for accurate calculation or operational clarity.

Alongside this, a dedicated P11D(b) submission and payment function will be delivered for the 2026 to 2027 tax year. It will handle the final cycle of Class 1A NIC reporting under the existing regime. From April 2027, the process changes, as Class 1A NIC becomes reportable in real time, removing the need for an annual P11D(b) entirely.

The direction is consistent. As mandatory payrolling approaches, the module will mature into a more automated, more controlled and more complete solution so organisations can manage benefits confidently with minimal administrative effort.

Comprehensive guides, including configuration steps, best practices, and example workflows, will be published in advance of the module being released at the end of February 2026.

When the time comes, and a decision to move forward with our BIK module comes, please contact your regular Fourth contact. 

Please do not register for Payroll Benefits in the 2026/2027 Tax Year without having the BIK module in place and letting Fourth know.