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April 2027, not 2026
Mandatory payrolling of benefits in kind starts on 6 April 2027, and it is being phased. It was originally announced for April 2026 and deferred by a year, so if you prepared for 2026 you have breathing room, and if you have not started you now have until 2027.
From that date most benefits must be reported in real time through your Full Payment Submission, rather than annually on a P11D after the year end.
What is in and what is not
Phase 1, from 6 April 2027, is narrower than most coverage suggests. It covers five benefits only: company cars, car fuel, vans, van fuel, and employer provided medical benefits. Everything else stays on the P11D for now.
Phase 2 follows from 6 April 2028 and brings in most other benefits. But note the carve out, because it is widely misreported: employment related loans and living accommodation are excluded and remain voluntary. HMRC has set no date for mandating them. If you provide a director loan or accommodation, you are not working towards a 2028 deadline for those.
You will not need to register in advance, which is a change from the current voluntary system where missing the registration deadline locked you out for the year. The exception is loans and accommodation, where you do need to register if you want to payroll them early.
What actually changes for you
The tax on benefits comes out of your employees pay each month rather than being collected through a tax code adjustment the following year. For employees, that is a real improvement. The current system means someone gets a company car in May, and the tax catches up with them through a code change months later, often as an unpleasant surprise.
For employers, the work moves. P11Ds disappear for payrolled benefits, but you now need the benefit values right every single month rather than once a year in July. Class 1A National Insurance is still due, and the P11D(b) still exists.
The hard part is that you can no longer true things up at year end. A company car changing mid month, or a medical policy renewing at a different premium, needs handling as it happens.
What to do before April 2027
Ask your payroll software provider whether they are ready. Most are, but you want to know now rather than in March 2027.
Get a proper list of every benefit you provide and who receives it. In our experience this is where the surprises are, and small employers routinely find benefits nobody had recorded as benefits.
There is a genuine concession worth knowing: HMRC has said there will be relief from inaccuracy penalties during the first year, 2027/28, while employers adjust. That is not licence to be careless, but it does mean a good faith error in year one is unlikely to be punished.
Common questions
Can I start payrolling now?
Yes, voluntary payrolling exists today and there is a good argument for starting early rather than being forced into it cold. You currently need to register before the start of the tax year.
Do P11Ds disappear completely?
Not entirely. Loans and accommodation stay on P11D until the second phase, and the P11D(b) for Class 1A remains.
This reflects HMRC guidance as at July 2026, and the April 2027 date is confirmed but not yet in force. If you provide benefits and want to get ahead of it, get in touch.