Payrolling benefits in kind becomes mandatory from April 2027
From April 2027 employers must report benefits in kind such as company cars and medical insurance through payroll in real time, replacing the year-end P11D for those benefits.
Reporting benefits in kind through payroll becomes mandatory from April 2027 for company cars, car and van fuel, vans and medical benefits, with most other benefits following in April 2028. Loans and accommodation are deferred.
- Effective from
- April 2027 (phase 1); April 2028 (phase 2)
- Who it affects
- Employers, and employees with company cars, medical insurance and other benefits in kind
Reporting benefits in kind (BIK) through payroll is becoming mandatory from April 2027. Instead of reporting most benefits on a year-end P11D, employers will report them through payroll software in real time using Real Time Information (RTI), so the tax is collected as the benefit is provided.
What is changing and when
Phase 1 - from April 2027, mandatory payrolling applies to:
- company cars;
- car fuel;
- vans and van fuel;
- employer-provided medical benefits.
Phase 2 - from April 2028, mandatory payrolling extends to most remaining benefits in kind.
Deferred (start dates to be confirmed): employer-provided loans and living accommodation are excluded from the first phases while HMRC works through how to report them.
What it means
- For employees, the tax on benefits like a company car or medical cover is taken through your tax code across the year in real time, rather than being squared up after the tax year through a P11D adjustment. The amount of tax is the same - only the timing and reporting change.
- For employers, benefits must be put through payroll software and RTI rather than reported at year end. HMRC has said there will be a temporary easement from penalties for certain non-deliberate inaccuracies in the first year to ease the transition.
What to do now
Employers should check their payroll software supports payrolling benefits, and plan to register the benefits they provide before April 2027. Employees with a company car or medical insurance do not need to do anything, but may notice the benefit reflected in their tax code and take-home pay through the year.
For how benefits in kind are taxed now, see the benefits in kind guide; for the forms being phased out, see the P45, P60 and P11D guide.