Payrolling Benefits in Kind from April 2027: What Employers and Practices Need to Do Now
From 6 April 2027, payrolling benefits in kind becomes mandatory for many employers. Instead of reporting certain benefits on a P11D after the tax year ends, you’ll need to run them through payroll in real time.
The good news is that the rollout has been phased, and there is still time to prepare.
What’s changing with payrolling benefits in kind?
Currently, most employers report taxable benefits in kind (BiKs) once a year on a P11D. Under the new rules, the tax and Class 1A National Insurance on these benefits will be reported through your regular payroll submissions instead.
HMRC has confirmed a two-phase approach:
Phase 1: from 6 April 2027
Company cars and car fuel
Vans and van fuel
Employer-provided medical benefits
Phase 2: from 6 April 2028
Most other benefits in kind
Employer loans and living accommodation stay voluntary
You can read HMRC’s full guidance on the phased introduction of mandatory payrolling on GOV.UK.
Who is affected?
Any employer providing Phase 1 benefits, including small businesses with a single company car or a private medical policy for a director. Accountants and bookkeepers will also see the impact, as clients who’ve always relied on the P11D will need guidance and support.
What to do before April 2027
Make a list of your benefits. Note which employees receive cars, vans, fuel or medical cover, and the start dates of each.
Check your payroll software. It needs to support the additional data HMRC will require in each payroll submission. Revised technical specifications are expected this autumn, so ask your provider about their timeline.
Review your data. Car details (CO2 emissions, list price, fuel type, availability dates) need to be accurate and easy to retrieve.
Consider voluntary payrolling early. It lets you test the process before it becomes compulsory, though you must register with HMRC before the start of the tax year.
Plan for the cashflow effect. Employees may find themselves paying tax on 2026/27 benefits through their tax code while the 2027/28 charge is collected through payroll at the same time.
Brief your clients and staff early. Nobody likes surprises on their payslip.
How a managed payroll provider can help?
Changes like this are a good example of why many accountants and employers choose to outsource payroll. We keep up with HMRC guidance, handle the reporting, and make sure your benefits are processed correctly from the first pay run. Whether you’re a practice looking to support your clients or a business with its own team, we can help you get ready.
Get in touch with LL Payroll today to talk through your benefits and your readiness for April 2027.
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