UK Mandatory Payrolling of Benefits in Kind: Phased from April 2027

Following engagement with employers, payroll software developers, and representative bodies, HM Revenue & Customs confirmed in Agent Update issue 145 that mandatory payrolling of benefits in kind (BiK) will be introduced in phases from April 2027 — not as a single switchover. HMRC’s interim guidance on GOV.UK sets the same two-phase timetable for real-time reporting of Income Tax and Class 1A National Insurance contributions on in-scope benefits.

For UK employers and agents still finishing 2025–26 P11D season, this is the planning signal to audit car and medical benefits now, check payroll-software roadmaps, and diary voluntary payrolling registration windows before phase 1 goes live.

From 6 April 2027 to 5 April 2028, mandatory payrolling applies only to company cars, car fuel, vans, van fuel, and employer-provided medical benefits. Employers who provide those benefits will need to calculate Income Tax and Class 1A National Insurance in real time and report them through Real Time Information (RTI) via payroll software, rather than relying on end-of-year P11D-only reporting for those items.

HMRC says it will provide draft data-item guidance reflecting the removal of 94 RTI data fields for BiKs, and will update developer technical specifications for April 2027. Final phase 1 guidance is expected to align with Autumn Budget 2026 after further stakeholder work through summer 2026.

Mandatory payrolling for most other benefits in kind follows from April 2028. Loans and accommodation remain voluntary under the current published phasing — Agent Update 145 also notes employers will be able to register for voluntary payrolling from November 2026 for BiKs not mandated from April 2027, including loans and accommodation.

HMRC is considering expanding the voluntary service to allow payrolling of Class 1A National Insurance contributions on non-mandated benefits, with further detail promised in future Agent Updates. Software providers should watch the 2027 RTI technical specification cycle for phase 2 field design.

Inventory every benefit you currently report on P11D or already payroll voluntarily. Flag company cars, fuel, vans, and medical insurance as phase 1 priorities — these drive the earliest process and data changes.

Ask your payroll vendor when RTI BiK fields and Class 1A calculations for phase 1 will be ready in your live product. Align benefit policy documents, salary-sacrifice arrangements, and employee communications so staff understand that tax may be collected through payroll rather than a year-end coding adjustment alone.

Keep 2026–27 P11D and payrolling registrations accurate while you prepare. A delayed notice or incomplete software roadmap is not a reason to skip clean benefit records — HMRC’s measure modernises reporting; it does not forgive inaccurate valuations.

FinnAccountings helps Ireland and UK employers organise bookkeeping, expense trails, and tax prep drafts with Chartered Accountant insight before you or your ICAEW/ACCA or Chartered Accountant (Ireland) adviser reviews payroll and benefit filings. Start a free trial to keep benefit valuations and supporting documents review-ready — we prepare drafts for review; we do not submit RTI or P11D filings to HMRC on your behalf.

Related reading: our P11D benefits deadline briefing and the payroll product page covering PAYE Modernisation and RTI. Use the free tax calculator only for high-level planning estimates.