HMRC have announced that, from 6 April 2027, payrolling certain benefits in kind becomes mandatory, with HMRC phasing it in over two stages. Phase 1 covers company cars, fuel, vans, and medical benefits, with most others following in April 2028.
HMRC payrolling benefits are set to transform payroll processes, as new rules make it mandatory to process most benefits in kind through payroll instead of annual P11Ds from April 2027. Understanding these changes now will help payroll teams prepare well ahead of the deadline.
Here’s what’s changing for payrolling benefits in kind, and what it means for the way you run payroll.
What's changing for HMRC payrolling of benefits (and when)?
Payrolling a benefit means the Income Tax due is calculated and reported in real time through payroll, rather than gathered up after the tax year ends. Instead of a single annual exercise, the value of each benefit is fed into the regular payroll run, and the tax is collected throughout the year.
What is the phased rollout?
Following industry feedback, HMRC has opted for a staged introduction to payrolling benefits. Mandatory real-time reporting of Income Tax and Class 1A National Insurance contributions for certain benefits in kind and taxable expenses will be phased in, with phase 1 commencing from 6 April 2027 and phase 2 from 6 April 2028.
Phase 1 covers company cars, car fuel, vans, van fuel, and employer-provided medical benefits. Phase 2 brings in most of the remaining benefits from April 2028, with loans and accommodation remaining voluntary.
| Phase | Starts | Benefits covered |
|---|---|---|
| Phase 1 | 6 April 2027 | Company cars, car fuel, vans, van fuel, employer-provided medical benefits |
| Phase 2 | 6 April 2028 | Most remaining BiKs (loans and accommodation stay voluntary) |
The staged approach is welcomed by many. After all, it spreads the workload rather than dropping everything in one tax year. But, with that said, don’t treat 2027 as a problem for later. The teams that cope best will be those that start mapping their benefits and testing their processes well ahead of the deadline. You can keep track of the finer points on our payroll legislation hub, which we update as new guidance lands.
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What does this mean for your payroll process?
The biggest change isn’t the calculation itself, it’s the cadence. It’s shifting a task you used to do once a year to every pay period, which puts even more focus on accurate, timely data flowing into payroll.
From annual to monthly
Under the P11D approach, a small error could be quietly corrected at year’s end. Under real-time reporting, an out-of-date company car record or a late medical policy renewal feeds straight into someone’s tax for that period, and a wrong figure carried across several pay runs is far more taxing to correct than a single annual adjustment. Getting benefit changes into payroll promptly becomes part of the monthly discipline, not an afterthought.
The data fields are changing too
HMRC is also reworking the technical side. Draft data item guidance reflects the removal of 94 real-time information (RTI) data fields for BiKs, with technical specifications for developers on track to be updated to align with the revised data requirements from April 2027. In practice, that means your payroll software needs to be ready for the new reporting format. So, it’s worth checking with your provider that the change is on their roadmap.
The risk of falling behind on legislation isn’t hypothetical. Construction firm, McAvoy Group, came to Cintra after their previous provider failed to keep their payroll software updated with the latest legislative changes. This left their team exposed to compliance gaps and extra manual checking.
After moving to Cintra, McAvoy’s software automatically stays current with HMRC requirements, and the team saved around 17 hours every month on admin and payroll checks. That’s the difference the right setup makes when your software keeps pace with the rules, changes like mandatory payrolling become something your system handles, rather than something you scramble to keep up with. You can read the full McAvoy story here.
Getting your team ready
Preparing for HMRC payrolling benefits rewards clean, joined-up data—and that’s as much about process as it is about software. A few things worth doing before April 2027:
- Map your phase 1 benefits: List who has a company car, fuel, van, or medical cover, and confirm where each record currently lives.
- Tighten your change process: Make sure car swaps, leavers, and policy renewals reach payroll quickly, so the right figure is reported from the off.
- Check your systems talk to each other: Connecting your expense management data to payroll removes a lot of friction, particularly for fuel and mileage tied to company vehicles.
Prepare for the 2027 deadline
The change feels distant, but the organisations that handle it smoothly will be the ones that prepared their data and processes early, rather than scrambling at year-end. It reduces the compliance headache well in advance!
It’s worth keeping an eye on the official details in HMRC’s interim guidance on payrolling benefits in kind, too. Further technical guidance is expected by July 2026, with final phase 1 guidance aligned to the Autumn Budget 2026.
If you’d like to talk through how Cintra’s payroll software and services can take the strain out of HMRC payrolling benefits and real-time BiK reporting, book a demo with our team today.
Payroll Legislation Guide
The facts, figures, thresholds and allowances for 2026/27 spanning tax, National Insurance, pensions, statutory payments and more.
