Payrolling benefits in kind becomes mandatory from April 2027 — not 2026, what the phased rollout means

A correction first: an earlier post on this forum said payrolling benefits in kind would become mandatory in April 2026. That date has moved — HMRC has extended the delivery timeline, and the mandatory start is now 6 April 2027, introduced in phases. Here's what employers actually need to know.

What payrolling means

Most employers currently report taxable benefits in kind — company cars, private medical insurance and the like — after the end of the tax year on forms P11D, with a P11D(b) for the employer's Class 1A National Insurance. Payrolling means reporting the cash equivalent of the benefit through your payroll instead: it's added to the employee's taxable pay each pay period and reported to HMRC in real time through RTI, so the employee pays the right tax during the year rather than through a later tax-code adjustment. The P11D(b) is still needed for the employer's Class 1A NICs bill.

The phased rollout

From 6 April 2027 (phase 1), payrolling becomes mandatory for: company cars, car fuel, vans, van fuel, and employer-provided medical benefits. From April 2028 (phase 2), most other benefits in kind follow. So if you provide any of the phase 1 benefits, you're in the first wave — there's no extra year to wait.

What's excluded

Living accommodation and interest-free or beneficial loans can't be payrolled, because the benefit values can't be known at the start of the year — those stay on P11Ds.

What employers should do now

• Check whether you provide any phase 1 benefits — company cars and private medical cover are the common ones.
• Talk to your payroll software provider about real-time benefit reporting support for the 2027/28 tax year.
• Consider registering for voluntary payrolling for 2027/28 to get ahead of the mandatory start.
• Plan how you'll tell employees: payrolling changes their payslips (tax comes off during the year) even though their overall liability doesn't change.
• Gather the benefit data now — car list prices, CO2 figures, medical premiums — so you're not scrambling in early 2027.

One more time for the diary: 6 April 2027 for phase 1 — not 2026.