Payrolling benefits will start in phases from April 2027
Company cars, vans, their fuel and employer-provided medical benefits are in the first phase. Employers need to check each benefit before changing how they report it.
HMRC has set out a phased introduction to mandatory payrolling of benefits in kind: taxable benefits provided to employees or directors alongside their pay. The first group starts on 6 April 2027, with most remaining benefits following on 6 April 2028.
For an employer, the practical task is to establish which benefits fall into each phase and how their values will reach the person running payroll.
Which benefits move first
The April 2027 group covers company cars, car fuel, vans, van fuel and employer-provided medical benefits. HMRC's current guidance also addresses taxable expenses and the reporting of Income Tax and employer Class 1A National Insurance through payroll.
The mandatory start date for employer-provided loans and accommodation will be confirmed later. HMRC's interim guidance says voluntary payrolling will be available for these benefits from April 2027. Check the detailed conditions before choosing that route.
What changes for reporting
Many benefits are currently reported after the tax year on a P11D, unless the employer has chosen voluntary payrolling. Under the mandatory arrangements, the relevant benefit information and tax will be dealt with through payroll during the year.
An employer may have benefits in more than one phase. Keep a record of which reporting method applies to each one, including any end-of-year returns that are still required.
What to prepare now
List the benefits you provide, including benefits for directors. For each one, record the employee, the provider, the information needed to calculate its taxable value and when that information becomes available.
Discuss the two start dates with your payroll provider. Agree how changes such as a new company car, an employee leaving a medical scheme or an employee contribution will be reported to payroll.
Before the first affected payslip, explain the change to employees so they understand how tax on the benefit will be collected. Continue the existing reporting for benefits and periods that have not moved into mandatory payrolling.
HMRC describes the operational guidance as interim. Recheck it before making the change, particularly for benefits outside the first phase and any transitional arrangements.
Current guidance and tools
- Payroll and workplace pension requirements
The regular reporting and pension duties for employers.
- Payroll for a director-only company
Salary reporting and registration points for company directors.