Tax news · June 2026
From April 2027 most staff benefits must be taxed through the payroll in real time rather than reported on a P11D. Here is what employers need to know and do.
Employers face a major change to how they report staff perks. From April 2027, the payrolling of most benefits in kind becomes compulsory, which means benefits such as company cars, private medical insurance and gym memberships must be taxed through the payroll in real time rather than reported on a P11D form after the year ends. The change was originally planned for 2026 but was put back a year to give employers more time to prepare.
At the moment most employers report benefits once a year on a form P11D, and HMRC then collects the tax later through the employee's tax code. From April 2027 that largely ends. Instead, the cash value of the benefit is added to the employee's pay each period and taxed straight away through PAYE, so the tax is collected in the same month the benefit is enjoyed. Employers will still pay their Class 1A National Insurance on the benefits, but the reporting moves into the regular payroll run.
This affects every employer that provides taxable benefits to staff, from a single director with a company car to a large business with a full benefits package, and it affects the employees too, who will see the tax on their perks taken evenly through the year rather than through a code adjustment. Payrolling is already allowed voluntarily, and many employers use it, but from 2027 it becomes the default for most benefits.
Employers should not wait until 2027. The sensible move is to register to payroll benefits voluntarily before then, so the first compulsory year is not also the first time you have done it. You will need payroll software that handles benefits, accurate benefit values, and clear communication with staff so they understand why their take home pay changes. Getting the values right matters, because mistakes feed straight into people's pay and are noticed quickly.
We think this is one of the more sensible changes coming, because taxing benefits in real time is simpler and fairer than the old P11D and tax code shuffle, and it removes a job that always landed in July. The risk is for employers who leave it late, because moving a whole benefits package onto the payroll for the first time under a compulsory deadline is not the moment to discover that your software or your records are not ready. Our advice is to switch voluntarily in good time, iron out the wrinkles on your own terms, and walk into 2027 with it already working.
We help employers set up payrolling of benefits, value the benefits correctly, get the right software in place, and explain the change to staff. If you would like to move ahead of the deadline rather than rush it, we can manage the whole transition for you.
It means taxing staff benefits such as company cars and medical insurance through the payroll in real time, so the tax comes out of pay each period, rather than reporting them on a P11D after the year ends.
From April 2027 for most benefits in kind. Employers can choose to payroll benefits voluntarily before then, which is the best way to be ready.
We will set up payrolling of your staff benefits and manage the move before it becomes compulsory. Book a free call back and we will get you ready.