Mandatory Payrolling of Benefits from April 2027 - What Employers Need to Know

A Fundamental Change to Benefit Reporting

From 6 April 2027, certain taxable benefits in kind will need to be reported through payroll in real time rather than being reported annually on Form P11D.

While some employers have already adopted voluntary payrolling, the move to a mandatory regime represents one of the most significant changes to employment tax compliance in recent years. Employers that have yet to payroll benefits will need to review processes, technology, and internal responsibilities well before April 2027.

What Is Changing?

The new regime will be introduced in two phases:

From 6 April 2027

• Company cars
• Company car fuel
• Vans
• Van fuel
• Private medical insurance

From 6 April 2028

• Most remaining taxable benefits

Employment-related loans and living accommodation will remain outside mandatory payrolling and can continue to be voluntarily payrolled (but registration will still be required for this).

How Will It Work?

Under mandatory payrolling:

• Taxable benefits will be reported through payroll.
• Employees will pay tax on benefits during the year.
• HMRC will no longer rely on annual P11D reporting for affected benefits.
• Class 1A NIC liabilities will arise during the tax year rather than being paid after year end.

Why This Matters

For employers, the change is far more than an administrative adjustment. It requires a move from year-end reporting to real-time reporting, meaning payroll teams will need access to accurate benefit data every pay period.

The transition may seem a time away, but employers should start understanding the implications now.