Mandatory Payrolling of Benefits in Kind from April 2027

From 6 April 2027, the way employers report and tax certain Benefits in Kind (BiKs) will change.

HMRC is introducing mandatory payrolling in phases, moving the reporting and taxation of certain benefits from the current year-end process to real-time reporting through payroll.

The first phase, from 6 April 2027, will apply to company cars, car fuel, vans, van fuel and employer-provided medical benefits. Mandatory payrolling of most other Benefits in Kind will follow from April 2028.

The change is intended to ensure that Income Tax is collected in real time as benefits are provided. It will also require employers to have robust processes in place to ensure that accurate and timely benefit information is provided to payroll.

We will support you through this transition and work with you to ensure your payroll processes and benefit reporting remain compliant and efficient.

What is changing?

From 6 April 2027, mandatory payrolling will apply to:

• Company cars
• Car fuel
• Company vans
• Van fuel
• Employer-provided medical benefits

For these benefits:

• They will be reported through payroll and Real Time Information (RTI), rather than through the existing year-end P11D process.
• Income Tax will be collected through PAYE during the tax year.
• Class 1A National Insurance contributions will be calculated and reported in real time through the payroll process.

Employers will not need to register to payroll these benefits, as payrolling will be mandatory from 6 April 2027.

What about other Benefits in Kind?

Mandatory payrolling of most other Benefits in Kind will be introduced from April 2028.

However, employers will have the option to voluntarily payroll non-mandatory Benefits in Kind from April 2027. Registration for voluntary payrolling for the 2027/28 tax year will open in November 2026, with registration required by 5 April 2027.

If you choose to voluntarily payroll non-mandatory benefits, the associated Class 1A National Insurance contributions will also be reported through payroll in real time.

Voluntary payrolling may be worth considering where it could simplify your benefit reporting processes by allowing benefits to be reported throughout the year rather than being dealt with separately at the end of the tax year.

At present, we do not recommend voluntarily payrolling employer-provided loans or living accommodation. We will keep this under review and update you if our recommendation changes.

Globally mobile employees

Employers can choose to exclude eligible globally mobile employees from mandatory payrolling from 6 April 2027. This is done by submitting an online G-Form to HMRC, available from November 2026. Benefits for excluded employees continue to be reported through the year-end P11D and P11D(b) process. See HMRC’s mandatory payrolling guidance for eligibility and how to apply.

At a glance

Benefit	From 6 April 2027	From April 2028
Company cars	Mandatory	—
Car fuel	Mandatory	—
Vans	Mandatory	—
Van fuel	Mandatory	—
Employer-provided medical benefits	Mandatory	—
Most other BiKs	Voluntary	Mandatory
Loans	Voluntary	Remains outside mandatory payrolling
Living accommodation	Voluntary	Remains outside mandatory payrolling

What does this mean for you as our client?

The introduction of mandatory payrolling will require robust processes, prompt reporting and close collaboration between you and our payroll team.

You will need to:

• Provide accurate and timely benefit information for all relevant employees.
• Notify us promptly of:
  • New benefits provided to employees.
  • Changes to existing benefits, such as company car changes, changes in medical insurance premiums or changes to private fuel provision for company cars or vans.
  • Benefits that have ended.

It will be particularly important that changes are communicated to us before the relevant payroll cut-off date so that the correct benefit value can be included in payroll.

Our role as your payroll provider

We will:

• Process benefit values through payroll in accordance with HMRC legislation and guidance.
• Calculate and deduct the appropriate Income Tax through PAYE.
• Include relevant benefits within RTI submissions to HMRC.
• Calculate and report Class 1A National Insurance contributions on payrolled benefits.
• Support you with payroll reporting and provide guidance on best practice.

What do you need to do now as an employer?

We recommend that you:

• Review the benefits you currently provide to employees.
• Identify which benefits will be subject to mandatory payrolling from April 2027.
• Consider whether voluntary payrolling of other benefits is appropriate for your business.
• Check whether any employees may be eligible for the globally mobile employees exception.
• Create and maintain an up-to-date record of employee benefits and changes throughout the year.
• Provide us with a detailed record of relevant benefits as part of your regular payroll input process. We will provide a template to support this.
• Ensure that changes to benefits are communicated to us promptly.

Communicating the changes to employees

We recommend communicating the changes to employees before April 2027. We can provide a template employee communication to help you explain the changes.

Employees should understand:

• Which benefits will be payrolled.
• Why their payslips may change.
• How benefits will be taxed through payroll.
• That the taxable value of a benefit is included when calculating PAYE, but is not additional cash paid to the employee.
• That payrolling generally changes when the tax is collected, rather than creating an additional tax charge.
• That benefits will not be taxed twice as a result of being payrolled.
• Which benefits, if any, will continue to be dealt with outside mandatory payrolling.

A clear explanation will be particularly important where employees see an increase in PAYE deductions despite there being no corresponding increase in their cash salary.

Next steps

We recommend that you begin reviewing your benefits and existing processes now.

We will be in touch from late 2026 to:

• Review the benefits you currently provide.
• Identify the benefits that will need to be payrolled from April 2027.
• Discuss whether voluntary payrolling of other benefits is appropriate.
• Agree data submission formats and payroll deadlines.
• Support you with the transition and preparation for April 2027.

In the meantime, if you have any queries, please do not hesitate to get in touch.

We will communicate our fees in relation to payrolling benefits in due course.

Information correct at 28/10/2026. HMRC has said it will update its guidance further in autumn 2026, so details may change.