Solution Properties
Solution ID:
251119154517813
Last Modified Date:
Wed Nov 19 15:45:18 UTC 2025
Taxonomy Path:
Case category//How do I...//processing
Author:
[email protected]
Benefit in kind payments
Description

From the 2026/27 tax year, processing benefits through payroll will become mandatory. For the 2025/26 tax year, you can process basic BIK payments in Sage Payroll.

 NOTE: This won’t include Class 1, Class 1A NI or car allowances. 

You must register with HMRC to inform them that you’re going to payroll benefits for the coming tax year. You must complete this no later than 5 April 2025. Read the HMRC guide, How to use the payrolling benefits and expenses online service to learn how to do this.

These payments are notional payments so won’t increase the employees pay. They’re subject to PAYE but not National Insurance (Class 1 and Class 1A). This includes both employee and employer NI.

The Full payment submission (FPS) to HMRC will include these details and any other reports that show payment information.

For more information on BIK, read Benefit in kind payments FAQs.

 CAUTION: Use the BIK payments only to process benefits. This is due to how it's reported on the FPS. 

Cause
Resolution

Creating the payment

You can create the payment in settings or while processing the payroll.

 NOTE: The payments don’t count toward pension calculations. 

▼Set up in settings
  1. Select Settings.
  2. Select Payments and deductions.
  3. Select the Payments tab.
  4. Select Create new payment.
  5. Under Payment category, select Payrolling of Benefits.
  6. Under Payment type, select Benefit in Kind (BIK).
  7. Change the Name and Description to represent what the BIK is for. 
  8. Select Save.
▼Set up in a pay run
▼Process using Standard pay run
  1. Select Summary in the menu bar.
  2. Select Process pay run.
  3. Confirm the pay date and select Next.
  4. Enter any required absence and select Next.
  5. Select the required employee.
  6. Select Add Payment and select Add a new payment.
  7. Under Payment category, select Payrolling of Benefits.
  8. Under Payment type, select Benefit in Kind(BIK).
  9. Change the Name and Description to represent what the BIK is for. 
  10. Select Save.
▼Process using Enhanced pay run
  1. Select Summary in the menu bar.
  2. Select Process pay run.
  3. Select the required employee.
  4. Select Add payment
  5. Select Create new payment.
  6. Under Payment category, select Payrolling of Benefits.
  7. Under Payment type, select Benefit in Kind (BIK).
  8. Change the Name and Description to represent what the BIK is for. 
  9. Select Save.

Adding the payment to an employee

You can only add this while processing the pay run.

▼Payment set up in settings
  1. Select Summary in the menu bar.
  2. Select Process pay run.
  3. Confirm the pay date and select Next.
  4. Enter any required absence and select Next.
  5. Select the required employee.
  6. Select Add Payment and choose the name of the BIK payment from the list.
  7. Enter the required Rate.
▼Payment set up in the pay run

The new payment automatically shows on the payslip. Add the required Rate and process as normal.

Steps to duplicate
Related Solutions

Benefit in kind payments FAQs