HMRC originally planned to make payrolling of most benefits in kind (BiKs) mandatory from April 2027, excluding beneficial loans and employer-provided accommodation. However, HMRC has confirmed a phased rollout, giving employers more time to prepare and adapt their processes.
From April 2027, the first phase will introduce mandatory payrolling for a core group of commonly provided benefits. These include:
- Company cars and car fuel
- Vans and van fuel
- Private medical insurance and healthcare benefits
From this point, employers must report the taxable value of these benefits through payroll in real time, rather than submitting the information via annual P11D forms. This approach should improve accuracy, reduce end-of-year reporting requirements, and ensure employees pay the correct tax throughout the tax year.
For all other benefits in kind, the current reporting approach will remain in place. Employers can continue to submit P11D forms unless they choose to payroll these benefits voluntarily. Voluntary payrolling remains a useful option for organisations that want to get ahead of the changes and begin transitioning early.
HMRC currently expects to introduce the second phase in April 2028. During this stage, it plans to bring most remaining benefits in kind into mandatory payrolling. However, it will still exclude more complex benefits, such as beneficial loans and employer-provided accommodation, and introduce them at a later date.
This phased approach gives employers a clear opportunity to review their benefits, update payroll systems, and strengthen internal processes ahead of each stage. By preparing early, organisations can reduce disruption and ensure they meet the new requirements smoothly.
If you would like to understand how these changes will affect your organisation or need support preparing for mandatory payrolling, contact our payroll team here.
This material is for informational purposes only and should not be relied upon as professional advice.
