Claire Pass
Payroll Supervisor
HMRC has announced a further delay to the mandatory payrolling of Benefits in Kind (BiKs), giving employers more time to prepare for significant changes to benefits reporting.
The move follows previous postponements and means that the new rules will now be introduced in stages rather than through a single nationwide rollout.
While the delay offers additional preparation time, employers should still familiarise themselves with the new timetable and understand how the changes may affect their payroll processes in the years ahead.
What has changed?
Payrolling Benefits in Kind allows employers to collect tax on employee benefits through payroll during the tax year, rather than reporting them separately through P11D forms after the year end.
HMRC had originally planned to make payrolling mandatory for most benefits from April 2026. That date was later pushed back and HMRC has now confirmed a phased introduction from April 2027.
Phase 1: From 6 April 2027
Mandatory payrolling will apply to:
- Company cars
- Car fuel
- Vans
- Van fuel
- Employer provided medical benefits
Phase 2: From 6 April 2028
Most remaining Benefits in Kind (BiKs) will move into mandatory payrolling.
However, beneficial loans and employer provided accommodation will remain exempt from mandatory payrolling. Employers can continue to report these benefits through P11D forms or choose to payroll them voluntarily.
What does this mean for employers?
For many businesses, the delay will be welcome news. It provides additional time to review payroll processes, prepare systems and work with software providers before the changes become mandatory.
The phased approach should also make implementation more manageable by reducing the number of benefits affected in the first year.
However, employers should be aware that the transition period may bring additional administration. Between April 2027 and April 2028, many businesses are likely to operate two reporting methods at the same time, with some benefits reported through payroll while others continue to be reported through the existing P11D reporting process.
This means P11D reporting will not disappear overnight. Employers may need to manage both systems during the transition period and ensure employees understand any changes to the way benefits are taxed.
Claire Pass, Payroll Supervisor at Hawsons, said:
"The additional time gives employers a valuable opportunity to review their processes and make sure they are ready for the changes ahead. While the phased introduction should make implementation more manageable, there will still be a period where businesses need to navigate both payroll reporting and P11D reporting.
"Clear guidance from HMRC will be important to help employers understand exactly how the two systems will operate alongside one another. Businesses that begin reviewing their benefits and payroll arrangements now are likely to be in the strongest position when the changes take effect."
What should employers do now?
Although the implementation date has moved, businesses should continue preparing for the changes.
Employers may wish to:
- Review which Benefits in Kind (BiKs) they currently provide to employees.
- Identify which benefits will be affected from April 2027.
- Speak to payroll providers and software suppliers about readiness for the new requirements.
- Consider how changes will be communicated to employees.
- Monitor further guidance from HMRC as the rollout approaches.
Further information
HMRC has confirmed that additional guidance will be published over the coming months to support employers ahead of implementation.
Businesses looking for more detailed information can view HMRC's guidance on the phased introduction of mandatory payrolling for Benefits in Kind here:
If you would like to discuss how these changes may affect your business, our payroll specialists are always happy to help.
Claire Pass
Payroll Supervisor
