Sep 9
From 6 April 2027, mandatory payrolling of benefits in kind will begin with five categories: company cars, car fuel, vans, van fuel and employer-provided medical benefits. Employers will have to report the taxable value through payroll and Real Time Information rather than relying on the normal year-end P11D process for these benefits. Employers do not need to register for the five mandatory categories.
Most remaining benefits in kind are scheduled to follow from April 2028. Employment-related loans and living accommodation will remain outside mandatory payrolling at that stage, although employers will be able to register to payroll them voluntarily from April 2027. The registration service for non-mandatory benefits is due to open in November 2026.
If your payroll process currently focuses mainly on salary, pensions and deductions, the preparation needs to happen well before April 2027.
| Feature | Before April 2027 | From April 2027 |
|---|---|---|
| Reporting method for the five in-scope benefits | P11D/P11D(b) year-end reporting where benefits are not already voluntarily payrolled | Taxable values reported through the Full Payment Submission at each relevant payroll date |
| When employees pay tax on the benefit | Through voluntary payrolling or, for non-payrolled benefits, commonly through PAYE coding and year-end reconciliation | Income Tax accounted for in real time through payroll |
| Class 1A National Insurance | Normally calculated after the tax year and paid following the P11D(b) process | Calculated and reported in real time on the taxable value for each pay period |
| Employee communication | P11D information where applicable, plus information on voluntarily payrolled benefits | Employer must provide an annual statement of relevant benefits by 1 June following the tax year |
| Registration needed | Registration was required for voluntary payrolling | No registration for mandatory phase-one benefits |
| Loans and accommodation | Normally reported through P11D unless otherwise permitted | Remain non-mandatory; voluntary payrolling available following registration |
HMRC has confirmed that the benefit itself will not have to appear as a separate item on an employee’s statutory payslip. The relevant values must instead be reported through the Full Payment Submission. Employers will still need to give employees details of the benefits received, whether they were payrolled and their values by 1 June after the tax year ends.
Moving these benefits into real-time reporting means payroll needs reliable benefit information throughout the year rather than only when P11Ds are prepared.
The general approach is to calculate or reasonably estimate the annual taxable value and divide it across the relevant pay periods. If the value changes during the year, the remaining payroll calculations can be adjusted. HMRC’s examples show this approach for medical benefits and other phase-one benefits.
A company car changing during the year, a medical policy renewing at a different premium or an employee becoming entitled to a benefit part-way through the year therefore needs to feed into payroll promptly. This sits alongside the broader digital and real time reporting obligations that businesses increasingly need their finance and payroll systems to support.
A Lisburn engineering firm provides company vans to eight site employees and private medical cover to eleven senior employees. If it currently reports those benefits through the year-end P11D process, much of the benefit work may be concentrated after 5 April.
From April 2027, the relevant taxable values will instead need to be available to payroll throughout the year. For monthly paid staff, the annual estimated benefit will generally be apportioned over the relevant monthly pay periods, with adjustments where values change.
That creates a different workflow for the finance team. Payroll needs timely data from fleet managers, insurers and whoever administers employee benefits. This is exactly the type of process gap our SME business advisory team can identify during a payroll-readiness review.
If you employ staff on both sides of the Irish border, the Irish system provides a useful comparison. Ireland’s PAYE Modernisation regime introduced real-time payroll reporting from January 2019, and taxable benefits such as company cars and medical insurance are treated as notional pay.
Irish Revenue says employers should report notional pay in the relevant payroll submission and use a best estimate where the actual benefit value is unavailable. The estimate should be reviewed regularly, at least quarterly, with adjustments made when the actual value becomes known.
UK groups with Irish operations may therefore already have processes that can inform the UK implementation. Our cross-border payroll specialists can review both sides together, particularly where benefit data sits outside payroll. That work is worth considering alongside how cross-border payroll friction gets eliminated more generally.
Employers that currently depend on an accountant or adviser to prepare P11Ds once a year may face the greatest operational change because benefit information must become part of the normal payroll cycle.
There is also a transitional cash-flow point. Class 1A NIC arising on 2026/27 benefits under the existing system will still fall due in July 2027, while Class 1A NIC on mandatory payrolled benefits provided from April 2027 will already be moving into real-time reporting and payment. HMRC has specifically warned employers to budget for this one-off overlap.
The final 2026/27 P11Ds that remain required under the current rules will generally still be due by 6 July 2027. Starting the project only shortly before April therefore risks combining implementation work with payroll year-end and the final annual benefit-reporting cycle.
Our SME business advisory team can help map where benefit information currently originates, who owns it and how it needs to reach payroll.
Official detail on the phased implementation, reporting process and benefits that remain outside mandation is available in HMRC’s policy paper on mandatory payrolling of benefits in kind. HMRC’s interim guidance was most recently updated on 4 September 2026, with further legislation and guidance expected as implementation approaches.
If your business provides company cars, vans, fuel or medical benefits to employees, talk to SCC Chartered Accountants about getting your payroll process ready well before April 2027. This is a change best implemented as a planned payroll project rather than during the first pay run in which it becomes mandatory.
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