Mandatory payrolling of benefits in kind is now set to be introduced in phases from 6 April 2027.
This will change how many employee benefits are reported and taxed. Instead of reporting most benefits after the end of the tax year on forms P11D, employers will report them through payroll during the year.
From April 2027, the first phase will apply to:
- Company cars and car fuel
- Vans and van fuel
- Employer-provided medical benefits
From April 2028, most other benefits will also come within the mandatory payrolling regime. However, beneficial loans and employer-provided living accommodation are expected to remain voluntary.
Under the new system, benefits will be reported through Real Time Information each pay period, such as weekly or monthly payroll. This should reduce some year-end reporting, but it also means payroll information will need to be accurate throughout the year.
Errors may be identified more quickly, and corrections may need to be made in real time, so it is worth reviewing your payroll processes before the new rules begin.
There is still time to prepare. Employers may want to start by checking:
- Which benefits are currently provided to employees and directors
- Which benefits will fall into the first phase from April 2027
- Whether payroll software and internal records will support the new reporting requirements
- Whether employees will need an explanation of how the changes affect their payslips
We can help you review your current benefits, identify what may need to change, and prepare your payroll systems ahead of the new rules.
