Mandatory payrolling of benefits in kind will begin on 6 April 2027, but it is now being introduced in phases. The first phase covers company cars, car fuel, vans, van fuel and employer-provided medical benefits. The Stockport accountants at U&W can help you identify the impact.
Most other taxable benefits are now expected to enter mandatory real-time payroll from April 2028. Employment-related loans and accommodation will remain voluntary. During 2026/27, continue using your existing payrolling or P11D process. Payroll support for Stockport businesses can help you avoid reporting the same benefit twice.
The real preparation is making sure benefit information reaches payroll before each Full Payment Submission. Professional bookkeeping support helps reconcile benefit costs, payroll entries and Class 1A National Insurance.
Which benefits move first?
| Benefit | Position from 6 April 2027 | What you should prepare |
|---|---|---|
| Company cars and car fuel | Mandatory real-time reporting | Vehicle details, availability dates and private fuel records |
| Vans and van fuel | Mandatory real-time reporting | Private-use arrangements and dates |
| Employer-provided medical benefits | Mandatory real-time reporting | Premiums, employee changes and renewal data |
| Most other taxable benefits | Planned for April 2028 | Continue current records and monitor guidance |
| Loans and accommodation | Voluntary payrolling | Choose payrolling or separate reporting |
Why this is more than a software update
The taxable value of an affected benefit will be reported through payroll, bringing Income Tax and Class 1A National Insurance closer to the period in which the benefit is provided.
Suppose you pay £600 for an employee’s annual medical policy. If the expected taxable value is spread across 12 monthly pay periods, £50 is included as the benefit value each month. The employee does not receive another £50 in cash. It is used to calculate tax.
You may need to revise the figure when an employee joins late, leaves early or changes cover. As common payroll problems before payday shows, late information creates incorrect deductions.
P11Ds will not disappear immediately
For 2026/27, employers that did not register to payroll benefits by 5 April 2026 must continue submitting P11Ds and a P11D(b). They are due by 6 July 2027.
From April 2027, first-phase benefits should move into real-time reporting. Other benefits may keep the existing process until their later phase. Loans and accommodation may remain on P11Ds when you do not choose voluntary payrolling.
Review your P60 responsibilities, the treatment of employee National Insurance and the separate liabilities covered in the guide to employer National Insurance rates.
Build a reliable information flow
Before April 2027, decide who must notify payroll when:
- An employee receives or returns a vehicle.
- Private fuel is provided or withdrawn.
- Medical cover starts, ends or changes.
- An employee contributes towards a benefit.
- A provider changes the annual cost.
- An employee leaves during the year.
Keep invoices, contracts and employee records. The guides to small business financial records and the bookkeeping checklist for UK businesses show why regular updates are safer than year-end reconstruction.
Your software must support HMRC’s revised payroll fields. Xero accounting support can organise the accounting records, while Xero reports for owners help you review staff costs.
Budget for the Class 1A overlap
Employers with first-phase benefits may face a temporary cash-flow overlap. In July 2027, you may still pay annual Class 1A National Insurance for benefits provided during 2026/27 while paying Class 1A in real time on relevant 2027/28 benefits.
Use business management accounts support to budget for both amounts. The guide to using management accounts to control spending explains why year-end accounts can hide short-term liabilities.
Benefit expenses also feed into company accounts. A corporation tax accountant for small businesses can check that payroll liabilities and staff costs are recorded consistently.
Check benefits that are often misunderstood
Business mileage within the approved rules is different from private fuel supplied with a company car. Review the guidance on tax-free mileage payments before coding both in the same way.
Director loans also have separate rules. The guide to director’s loan accounts explains why the company’s books and the director’s tax position must agree. Directors may also need personal tax return services UK where benefits affect Self Assessment.
When moving staff internationally, including through UK business relocation services to Dubai, check which country’s tax rules apply before processing benefits.
What you should do now
- List every benefit and taxable expense you provide.
- Separate April 2027 benefits from those expected in April 2028.
- Confirm who owns each source of benefit data.
- Test payroll cut-off dates and correction procedures.
- Forecast the Class 1A National Insurance overlap.
- Explain likely payslip changes to affected employees.
- Review HMRC’s further technical guidance when published.
Frequently asked questions
Which benefits must be payrolled from April 2027?
The first phase covers company cars, car fuel, vans, van fuel and employer-provided medical benefits.
Will employers still submit P11Ds after April 2027?
Yes. P11Ds may still be needed for benefits outside the first phase and for loans or accommodation that you do not payroll voluntarily.
Do employees pay tax on benefits in kind through payroll?
For mandatorily payrolled benefits, payroll reports the taxable value and calculates the employee’s Income Tax during the year. The benefit value is not extra cash pay.
Prepare before the first live submission
The main challenge is collecting correct information before payroll closes. Contact U&W to review your benefits, payroll process and Class 1A National Insurance planning before April 2027.
