Mandatory Payrolling of Benefits in Kind Starts April 2027 — An Employer's Checklist

If you're a limited company director or employer who provides company cars, fuel, vans or private medical insurance to staff, a significant change to how you report and tax those benefits starts in less than nine months. Here's what's confirmed and what you need to do before then.

What's changing

HMRC confirmed on 15 June 2026 that mandatory payrolling of benefits in kind will be introduced in two phases rather than all at once. Phase 1 begins on 6 April 2027 and covers company cars, car fuel, vans, van fuel, and employer-provided medical benefits. From that date, income tax and the relevant employer National Insurance on these specific benefits must be calculated and paid through payroll in real time, rather than reported after the fact on a P11D.

Phase 2, from April 2028, brings in most remaining benefits. Notably, beneficial loans and employer-provided living accommodation are staying outside the mandatory regime and will remain payrollable on a voluntary basis only, reflecting the added complexity of valuing these particular benefits in real time.

Why this matters

Payrolling in real time means employees see the tax impact of their benefits in each payslip, rather than facing a lump-sum tax code adjustment or unexpected bill the following year. For employers, it removes the year-end P11D reporting burden for phase 1 benefits — but only once your payroll software and processes are ready to handle it correctly from day one of the 2027/28 tax year.

Employer checklist

• Confirm which benefits you provide fall into Phase 1 — company cars, car fuel, vans, van fuel, and medical benefits specifically, not the wider benefits basket yet.
• Check your payroll software supports real-time benefit payrolling well before April 2027 — this typically requires registering with HMRC in advance of the tax year you intend to start.
• Register for payrolling via HMRC's online service ahead of 6 April 2027 if you haven't already — late registration can mean defaulting back to P11D reporting for that year.
• Communicate the change to affected employees — payslips will look different, and staff should understand why net pay may shift once benefits are taxed in real time.
• Note that P11D forms remain required for 2025/26, 2026/27, and potentially 2027/28 depending on which benefits your employees receive during the transition.
• Plan ahead for Phase 2 in April 2028 — if you provide loans or accommodation benefits, confirm these will remain on voluntary payrolling or traditional P11D reporting.
• Diarise the 6 July 2028 deadline for paying employer NIC on any benefits not yet brought into mandatory payrolling.

Key Numbers

• 6 April 2027 — Phase 1 start date for mandatory payrolling
• April 2028 — Phase 2 start date, covering most remaining benefits
• 6 July 2028 — deadline for employer NIC on benefits still reported via P11D

Sources

• Zellis: Mandatory payrolling of benefits — latest HMRC update and what employers should do now
• ActivPayroll: Mandatory Payrolling of Benefits in Kind — HMRC Confirms Phased Introduction
• Prager Metis: Mandatory Payrolling of Benefits to Be Phased from April 2027
• BDO: Payrolling benefits in kind

Educational content only — not financial advice.