Mandatory payrolling of benefits in kind to be introduced in phases

18 June 2026 | posted in Payroll Business tax

HMRC has now confirmed that changes to the way Benefits in Kind (BiKs) are reported will be phased in from 6 April 2027, rather than being rolled out in one go next year as originally planned.

Mandatory real-time reporting of Income Tax and Class 1 National Insurance contributions for benefits in kind (BiKs) and taxable expenses will now be introduced in two stages:

Phase 1 will start from 6 April 2027 and covers motoring expenses and medical benefits only.
Phase 2 will start from 6 April 2028 and includes most other BiKs (but excludes loans and accommodation which will remain voluntary.)

Under the new rules, employee benefits will have to be reported to HMRC through your payroll system, rather than by Form P11D.

The BiKs that have to be payrolled from April 2027 are:

Company cars
Car fuel
Vans
Van fuel
Employer provided medical benefits

Find out more about payrolling BiKs here.

A phased approach gives software providers more time to introduce the changes needed to payroll systems and gives employers who provide more complex benefits more time to prepare.

It also gives employers an element of flexibility, as those who want to payroll any other categories of benefit before it becomes mandatory can do so voluntarily in 2027/28. However, the information required for those benefits in 2027/28 may be less than HMRC will need when payrolling for those benefits becomes mandatory in later tax years.