HMRC has confirmed that mandatory real-time reporting of Income Tax and Class 1A National Insurance contributions (NICs) for certain benefits in kind (BiKs) and taxable expenses will now be phased in from 6 April 2027.
This replaces the original plan to introduce mandatory payrolling for most benefits in kind at the same time.
Phase one: motoring and medical benefits
From 6 April 2027, mandatory payrolling of BiKs will initially apply only to:
- company cars
- car fuel
- vans
- van fuel
- employer-provided medical benefits
Under payrolling, the taxable value of relevant BiKs and expenses is reported through the Full Payment Submission (FPS). This means benefits are taxed through payroll in real time, rather than being reported after the end of the tax year on a P11D.
Phase two: most other BiKs from April 2028
Phase two will see the mandatory payrolling of most other BiKs from April 2028.
However, employment-related loans and accommodation will remain voluntary for the time being.
Employers should also note that benefits not included in phase one will continue to be reported on forms P11D, unless they are voluntarily payrolled.
Further guidance expected
HMRC has said that technical guidance will be updated by July 2026, with final guidance on the phase one rules expected to be published alongside the Autumn Budget.
Companies already using payrolling for benefits in kind will be able to continue using the real-time system.
HMRC has also stated that, from April 2027, only company car, van and private medical benefit data should be entered into the specific FPS data fields introduced for phase one.
The phased approach should give employers, payroll teams and software providers more time to prepare, train staff and adapt their processes.
However, comprehensive guidance will be needed to clarify the practical implications of the latest announcement, particularly how the old and new systems will work alongside each other without creating confusion for employers.
With thanks to Sara White, Editor, Business & Accountancy Daily.
