In Brief: Payrolling benefits in kind becomes mandatory in two phases. From 6 April 2027, you must payroll company cars, car fuel, vans, van fuel, and medical and dental benefits. Most other taxable benefits follow from 6 April 2028, while loans and living accommodation stay optional. You’ll also pay Class 1A National Insurance on payrolled benefits monthly, rather than once a year.
Last updated: October 2026
HM Revenue & Customs (HMRC) is changing the way benefits in kind (BIK) are reported. From 6 April 2027, payrolling certain benefits becomes mandatory, with most others following in April 2028. That means fewer annual P11D and P11D(b) forms, and more of your benefits taxed in real time.
April 2027 is closer than it looks, so the best time to start preparing is now. Let’s look at what’s changing and the key things to think about.
Payrolling benefits in kind: As it stands
Right now, you have two options for reporting benefits:
- P11D forms: report employee benefits to HMRC after the end of the tax year, using the traditional P11D route.
- Payrolling: if you registered with HMRC before 6 April 2026, you can tax benefits in real time through Pay As You Earn (PAYE).
For more information on registering payroll benefits with HMRC via the online service, read: How to Register for Payrolling Benefits
What’s going to change in April 2027?
HMRC is bringing in mandatory payrolling in two phases, rather than all at once:
- From 6 April 2027: company cars, car fuel, vans, van fuel, and medical and dental benefits must be payrolled.
- From 6 April 2028: most other taxable benefits must be payrolled too.
For example, if you provide company cars and private medical insurance, both move onto payroll in April 2027. A gym membership, on the other hand, can stay on a P11D until April 2028.
Loans and living accommodation sit outside the mandatory rules. You can keep reporting them on a P11D, or choose to payroll them voluntarily.
There’s a change to National Insurance too. From April 2027, you’ll pay Class 1A on payrolled benefits each month through PAYE, instead of declaring it once a year on your P11D(b). Good news for accuracy, but be aware of the overlap: in July 2027 you’ll still pay Class 1A on your 2026/27 benefits the old way, while also paying monthly for phase one benefits.
So, make sure your payroll process can handle both changes, and upgrade or replace your software if it can’t.
We know change can feel daunting, especially when it reshapes how you handle benefits for years to come. In the long run, though, it’ll save you time and cut down on year-end admin.
For HMRC’s latest updates, keep an eye on the Employer Bulletins.
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5 key considerations for employers
If you’re not already payrolling benefits, now’s the time to think about how mandatory payrolling will affect your systems and processes. Here are five steps to get started.
Here are 5 initial steps you can take:
Step 1. Keep a close eye on HMRC updates
HMRC’s guidance is still interim, and more detail is expected as April 2027 gets closer. Check for updates regularly so nothing catches you out.
Step 2. Review your current systems
Work out which of your benefits fall into phase one and which can wait until 2028. Then check whether your payroll can handle real-time Class 1A, and work with your payroll team to close any gaps.
Step 3. Communicate with your employees
Explain the changes clearly, including how they’ll affect pay and tax. HMRC will remove phase one benefits from tax codes before April 2027, so employees may notice a change and wonder why.
Step 4. Train your payroll team on the new requirements
Make sure your payroll team understands the phases, the monthly Class 1A reporting, and what still needs a P11D. A little training now means fewer errors later.
Step 5. Don’t leave it until the last minute
Give yourself enough time to test your setup before April 2027. If you’d like to payroll non-mandatory benefits (including loans or living accommodation) from April 2027, you’ll need to register with HMRC between November 2026 and 5 April 2027. It’s a good way to get used to the process before phase two arrives. And if you’d like a hand getting ready, our team’s happy to walk you through it.
Sign up for Cintra's Payrolling Benefits service
P11Ds giving you a headache? By April 2027, you’ll need to have made the switch to payrolling benefits, so why not get ahead of the curve? Register to payroll benefits now.
