Mandatory payrolling of benefits in kind begins in phases from 6 April 2027. Employers should use the 2026/27 tax year to identify benefits, check data quality and confirm that their payroll process can support real-time reporting.
What changes from April 2027
From 6 April 2027, mandatory real-time reporting starts for company cars, car fuel, vans, van fuel and employer-provided medical benefits. Income Tax will be collected through payroll and Class 1A National Insurance will move into the regular PAYE process for the affected benefits.
Most other taxable benefits are scheduled to become mandatory from April 2028. Employment-related loans and living accommodation remain outside the mandatory timetable for now, although voluntary payrolling options are planned.
What employers do today
Until the relevant mandatory phase begins, employers normally report non-payrolled benefits after the tax year using P11D and P11D(b), while paying Class 1A NIC by the normal July deadline. Employers already registered for voluntary payrolling should continue following HMRC’s current rules.
Preparation checklist
Create a complete register of benefits, the employees who receive them, start and end dates, cash-equivalent values and supporting evidence. Decide who owns each data field and when it must reach payroll before every pay run.
Ask your software provider or payroll bureau how the phased categories will appear on the Full Payment Submission, how corrections will work and how Class 1A NIC will be reconciled.
Review employees on reduced or irregular pay because tax deductions are still constrained by the 50% overriding limit. A year-round process will be safer than trying to reconstruct benefit data at year end.
Why prepare before the deadline
The move from annual reporting to real-time reporting changes the timing of both employee tax and employer Class 1A NIC. Budget for the transition and explain the payslip impact to affected employees before the first mandatory pay period.
Purely Payroll can help SMEs organise benefit data and incorporate the new reporting into a compliant payroll process. contact Purely Payroll to discuss the preparation work your business needs.
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