Mandatory payrolling of Benefits in Kind: phased introduction confirmed

HMRC has confirmed that mandatory payrolling of benefits in kind (BiKs) will now be introduced in two phases, starting from 6 April 2027. Employers providing employee benefits must provide taxable values through the payroll each pay period (e.g. weekly or monthly) in real-time and apply Income Tax and Class 1A NICs through payroll rather than submitting yearly P11D forms.

Phase 1 will be rolled out from 6 April 2027 and will include: company cars, car fuel, vans, van fuel and employer-provided medical benefits. 

Phase 2 will start a year later, on 6 April 2028, and will include most other Benefits In Kind except beneficial loans and living accommodation. These will continue to be voluntary.

While this change to real-time reporting through the payroll will reduce the need for year-end forms, it increases the importance of getting payroll right throughout the year. Errors will be picked up more quickly, and corrections may need to be made in real-time.

There is still time to prepare. HMRC is continuing to work with software providers and will release further technical guidance during 2026, with final details expected ahead of the Autumn Budget. 

Employers should start planning now. The sensible first step is to review the benefits you currently provide and identify which will fall into the first phase.  This is a significant shift in how benefits are taxed and reported; preparing early will reduce disruption and make the transition much smoother.

We will of course keep you up to date with the emerging guidance and the announcements from the Autumn Budget, but in the meantime please get in touch if you need any help in reviewing your benefits in advance of these changes, or would like to discuss the changing requirements.