Payrolling benefits in kind is becoming mandatory — here's what employers need to know now

If your business provides any benefits to employees — company cars, private healthcare, gym memberships, or anything else on top of their salary — the way you report those benefits to HMRC is changing. From 6 April 2027, payrolling benefits in kind becomes mandatory for most employers.

That's just under a year away. It's not urgent today, but it's soon enough that it's worth understanding now — rather than scrambling to sort it in March.

Here's what it means and what to do about it.

What is payrolling of benefits?

At the moment, most employers report benefits in kind to HMRC once a year through a P11D form — one per employee, filed by 6 July each year. It's an annual admin job that tells HMRC what perks employees have received, and triggers an adjustment to their tax code.

Payrolling of benefits changes that. Instead of reporting once a year on a P11D, you add the value of the benefit to the employee's payslip each month and tax it in real time through PAYE — just like you do with salary.

The idea is to make the process more accurate and more consistent. HMRC gets the information month by month, employees pay the right tax as they go, and the P11D form becomes unnecessary.

When is this changing?

6 April 2027 is the mandatory start date for most employers.

Some employers have already voluntarily payrolled their benefits — that's been possible since 2016. But from April 2027, it won't be optional any more.

One thing worth knowing: loans and living accommodation are excluded from mandatory payrolling. If you provide either of these to employees, you'll still need to report those separately.

What about P11Ds in the meantime?

They're not going away just yet. You still need to file P11Ds for the 2025/26 and 2026/27 tax years in the usual way.

That means:

6 July 2026 — P11D deadline for the 2025/26 tax year (coming up soon)

6 July 2027 — P11D deadline for the 2026/27 tax year (the last one for most benefits)

After that, payrolling takes over and P11Ds are no longer needed for the benefits covered by the new rules.

A cash flow point worth flagging now

July 2027 comes with a one-off quirk that's worth knowing about well in advance.

In July 2027, employers will face two Class 1A NIC obligations landing at once: the usual payment based on the 2026/27 P11D, plus the start of real-time Class 1A NIC payments under the new payrolling system. It's a one-time overlap — it won't happen again — but it's the kind of thing that can catch businesses off guard if they're not expecting it.

We'll be reminding employer clients about this well ahead of time. For now, just make a mental note.

What do you need to do?

If you're currently filing P11Ds, here's what we'd recommend:

1. Check which benefits you're providing. Make a list of what you offer — cars, fuel, health insurance, any other perks. You'll need this information to set up payrolling correctly.

2. Talk to your payroll software provider. Most payroll software will be updated to handle this, but it's worth checking your provider's roadmap and making sure you understand the process.

3. Don't rush into voluntary payrolling just yet. If you haven't already registered to voluntarily payroll benefits, the registration window for 2026/27 has already closed. You'll move across at the mandatory switch point in April 2027.

4. Talk to us. If you're not sure how this affects your business, drop us a message. We'll help you understand what you need to do and make sure nothing gets missed in the changeover.

The short version

Payrolling of benefits replaces P11D reporting from 6 April 2027. P11Ds are still required for 2025/26 and 2026/27 — including the one due 6 July 2026. Loans and accommodation are excluded from the new mandatory rules. July 2027 will involve a one-off double Class 1A NIC payment — plan ahead. There's no need to panic, but there is time to prepare — and that's the best place to be.

If you have any questions about how this affects your payroll, drop us a message and we'll take a look with you.