Update on a phased process for Payrolling Benefits

Phase 1 include company cars and fuel, vans and van fuel, as well as private medical insurance and other healthcare-related benefits.

Phase 1 from April 2028 HMRC plans to extend mandatory payrolling to most remaining benefits in kind. More complex benefits, including beneficial loans and employer-provided accommodation

HMRC had initially intended to introduce mandatory payrolling for most benefits in kind (BiKs) from April 2027, apart from beneficial loans and employer-provided accommodation. It has now confirmed that this will be implemented in stages, allowing employers additional time to update systems and processes.

The first phase will begin in April 2027 and will apply to a group of widely provided benefits. These include company cars and fuel, vans and van fuel, as well as private medical insurance and other healthcare-related benefits.

From this date, employers will be required to report these benefits through payroll as they arise, rather than submitting details at the end of the tax year using P11D forms. This real time reporting is expected to improve accuracy, reduce the need for year-end submissions, and ensure employees pay the correct amount of tax throughout the year.

For benefits not included in the initial phase, the existing reporting method will continue. Employers can still use P11D forms unless they decide to payroll those benefits on a voluntary basis. Choosing to payroll benefits early may help organisations prepare for the upcoming changes.

A second phase is expected to follow in April 2028, at which point HMRC plans to extend mandatory payrolling to most remaining benefits in kind. More complex benefits, including beneficial loans and employer-provided accommodation, will continue to be excluded until a later stage.

This phased introduction gives employers the opportunity to review their current benefit offerings, make any necessary updates to payroll systems, and strengthen internal processes ahead of each stage. Early preparation will help minimise disruption and support a smooth transition to the new requirements.

If you would like to explore how these changes may impact your organisation or need assistance preparing for mandatory payrolling, please get in touch with our payroll team.

Neil Manuel