HMRC has announced it will now phase in mandatory payrolling of benefits and taxable employment expenses over two years.
Mandatory payrolling of benefits had already been delayed from April 2026 to April 2027 and now from April 2027 it will only be mandatory to payroll:
- Company cars
- Company vans
- Employer-provided fuel for private journeys
- Employer-provided medical benefits
P11Ds vs payrolling benefits
If reporting benefits annually via P11D forms, the employee pays income tax either through their own Self-Assessment tax return or via an adjustment to their PAYE tax code.
If benefits are payrolled, the employee pays the income tax due on the benefit in monthly instalments under PAYE. The benefits are processed as part of payroll Real Time Information (RTI) submissions.
From April 2027
Reporting and paying income tax on benefits through payroll will become mandatory if dealing with the above-mentioned benefits. There will be no requirement to submit P11D forms for each employee.
All other benefits can be reported via P11D forms or voluntarily payrolled. It will be possible, but not necessary, to payroll interest-free or low interest (beneficial) loans and employer-provided accommodation from April 2027.
From April 2028
It will become mandatory to payroll most other benefits, except for beneficial loans and employer-provided accommodation. These can still be reported via P11D forms.
Next steps
Payrolling of benefits is processed alongside the employee’s pay and so employers will need to consider the impact this may have on how they operate their payroll. It will also be important to communicate to all employees the changes before they occur.
For more information around the implementation of the mandatory payrolling of BIKs, or support and advice for planning ahead of these changes, including remuneration package implications, please contact Claire Proctor at claire.proctor@ct.me or Fraser McCallum at fraser.mccallum@ct.me.
