From 6 April 2027, employers will need to start reporting certain benefits in kind (BiKs) through payroll, as HMRC begins the phased introduction of mandatory payrolling.
For the 2027/28 tax year, the new rules will initially apply to:
- Company cars
- Company car fuel
- Vans
- Van fuel
- Private medical benefits
Instead of these benefits being reported after the end of the tax year using form P11D, the taxable value will be processed through payroll in real time.
From April 2028, mandatory payrolling is expected to extend to most other benefits and expenses. Employers will also be able to register voluntarily from November 2026 to payroll certain benefits outside the first phase, including beneficial loans and living accommodation.
What does this mean for employees?
Employees who currently pay tax on benefits through an adjustment to their tax code will instead see the tax deducted directly through PAYE.
For some employees, this could temporarily make payslips more complicated, particularly where tax relating to benefits from previous years is still being collected through their tax code.
Employers should therefore consider communicating the changes clearly before April 2027.
What should employers do now?
If you provide benefits in kind to employees, now is a good time to start preparing. Consider:
- Reviewing all benefits currently reported through P11Ds.
- Checking whether your payroll software can handle real-time BiK reporting.
- Planning how joiners, leavers and changes in benefit values will be managed.
- Establishing processes for correcting underpayments or overpayments.
- Preparing communications so employees understand how their deductions may change.
The first mandatory reporting date may still be several months away, but preparing early should make the transition considerably easier.
If you would like help reviewing how the new rules could affect your payroll, please speak to the Progress Accountants team.
