Mandatory payrolling of benefits in kind from 2027: key dates and employer actions

Mandatory payrolling of benefits in kind (BiKs) will begin from 6 April 2027 as part of the UK's move towards reporting employee benefits through payroll during the tax year rather than through annual reporting processes. For employers that currently rely on P11D reporting, the change may require updates to payroll processes, benefit data collection and reporting controls.

Although implementation has been delayed from April 2026, the move away from annual P11D reporting remains unchanged. Employers should use the additional preparation time to review payroll processes, data flows and reporting workflows ahead of the new requirements.

What employers need to know – quick facts

• Mandatory payrolling of benefits in kind will begin on 6 April 2027.
• Company cars, car fuel, vans, van fuel and employer-provided medical benefits will be included in phase one.
• Most remaining benefits are expected to become mandatory from April 2028.
• Loans and accommodation benefits will remain outside the mandatory regime for now.
• HMRC intends to simplify reporting requirements by removing a number of Benefits in Kind-related RTI
• Employers should begin assessing payroll processes, systems and data readiness well ahead of implementation.

What's changing?

Many employers currently report BiKs through the annual P11D process. Under the new regime, affected benefits will instead be reported through payroll during the tax year, requiring employers to report and process relevant tax and Class 1A NIC liabilities during the year rather than through traditional year-end reporting processes.

The move was originally expected earlier, but following consultation with employers, payroll providers and software developers, implementation will now take place in phases from April 2027.

For organisations that still rely heavily on annual reporting, these P11D changes may require new processes, controls and reporting workflows.

Which benefits are included first?

From 6 April 2027, mandatory payrolling will apply to:

• Company cars
• Car fuel
• Vans
• Van fuel
• Employer-provided medical benefits

These are among the most commonly provided employee benefits and are already eligible for voluntary payrolling today.

Employers that already report payrolled benefits may find the transition simpler than organisations that continue to rely exclusively on annual P11D reporting.

What happens in 2028?

From April 2028, mandatory payrolling is expected to extend to most remaining BiKs.

However, loans and accommodation benefits will remain outside the mandatory regime and can continue to be reported separately.

The phased rollout gives employers more time to review systems, processes and reporting requirements before additional benefits move into scope.

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What does this mean for payroll teams?

For many organisations, the greatest challenge may be collecting and validating benefit data early enough to support in-year reporting.

Mandatory payrolling increases the importance of controls around benefit data. Payroll teams may need more frequent visibility of benefit changes, clearer ownership of data and stronger processes for transferring information between HR, benefits and payroll systems.

Areas to review include:

• How benefit data is collected
• Who is responsible for validating benefit information
• How benefit changes are communicated to payroll
• Existing controls around reporting accuracy
• Employee communications and support processes

Organisations that currently complete most benefit reporting at year-end may need to make more significant operational changes than those already using voluntary payrolling arrangements.

Changes to RTI reporting requirements

Alongside the phased rollout, HMRC has indicated that reporting requirements will be simplified. This includes plans to remove a significant number of Benefits in Kind-related fields from RTI submissions.

Further technical specifications and guidance are expected ahead of implementation.

HMRC is also continuing to consult on a number of areas, including the potential for voluntary Class 1A National Insurance reporting on benefits that remain outside the mandatory regime.

What should employers do now?

Although implementation doesn't begin until April 2027, employers should use the additional preparation time to assess whether their current processes are ready for real-time reporting.

Key actions include:

1. Review current BiKs reporting arrangements.
2. Identify which benefits fall within phase one.
3. Assess payroll and HR system readiness.
4. Review benefit data collection and validation processes.
5. Plan employee communications ahead of implementation.
6. Engage with payroll providers to understand upcoming system changes.
7. Consider how P11D reporting processes may need to evolve over time.

Looking ahead

The revised timeline gives employers more time to prepare, but organisations will still need to review their reporting processes before mandatory payrolling begins.

As organisations move away from traditional P11D reporting, accurate data, effective processes and payroll readiness will become increasingly important.

Employers that start planning now will have more time to identify data, process and reporting gaps before implementation.

Preparing for mandatory payrolling of benefits in kind? ADP payroll software and managed payroll services can help organisations support changing reporting requirements, automate payroll processes and improve the accuracy of benefit data reporting. Speak to an ADP specialist to learn how we can help you prepare for mandatory payrolling.

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