HMRC Delays Full Rollout of Payrolling Benefits in Kind

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HMRC has confirmed that mandatory real-time reporting for benefits in kind will now be introduced in phases, rather than through one full rollout from April 2027. The change gives employers more time to prepare, but it also means many businesses may need to manage both payroll reporting and P11D reporting during the transition.

What Is Payrolling Benefits in Kind?

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Benefits in kind, often called BiKs, are non-cash benefits provided to employees or directors. Common examples include company cars, private medical insurance, vans, fuel benefits and certain taxable expenses.

Traditionally, many of these benefits have been reported to HMRC after the end of the tax year using form P11D. Payrolling benefits means the taxable value is reported through payroll instead, so the tax can be collected in real time through PAYE.

What Has HMRC Changed?

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HMRC’s original plan was to bring most benefits in kind into mandatory payrolling from 6 April 2027. That approach has now been softened, with the rollout split into two main phases.

Under the revised timetable, phase one will begin from 6 April 2027 and will apply to a smaller group of benefits. Phase two is expected to begin from 6 April 2028 and will cover most other benefits in kind, subject to final HMRC guidance.

Which Benefits Will Be Included From April 2027?

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From 6 April 2027, mandatory payrolling is expected to apply to the following benefits:

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

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These are generally considered more straightforward benefits to report through payroll, although employers will still need accurate records and suitable payroll software in place.

What Happens to Other Benefits?

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Most other benefits in kind are now expected to move into mandatory payrolling from 6 April 2028. Until then, many employers will still need to use the existing P11D process for benefits that are not yet included in the mandatory payroll rules.

HMRC has also indicated that loans and accommodation will remain voluntary rather than mandatory under the revised approach. This means employers providing these benefits should continue to check the specific reporting rules that apply to them.

What Does This Mean for Employers?

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The delay may be helpful, but it does not remove the need to prepare. For many businesses, the phased approach could actually create more administration in the short term, because some benefits may be reported through payroll while others continue to be reported on P11Ds.

For example, an employer providing a company car and private medical insurance from April 2027 may need to payroll those benefits. If the same employer also provides another taxable benefit that is not included until 2028, that benefit may still need to be reported separately.

Why Preparation Still Matters

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Employers should not assume that the delay means no action is needed. Payroll teams, finance staff and external payroll providers may need time to review existing benefits, update software settings and make sure employee communications are clear.

Key areas to review include:

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Which benefits are currently provided to employees and directors
Whether benefits are already payrolled voluntarily
Whether payroll software can handle the new reporting requirements
How employees will be told about changes to their payslips and tax codes
Whether P11D processes will still be needed during the transition

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Will P11Ds Disappear?

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Not immediately. During the phased rollout, employers may still need to complete P11Ds for benefits that are not yet included in mandatory payrolling.

This means businesses should be careful not to remove their P11D processes too early. The safest approach is to review benefits category by category and confirm how each one should be reported for the relevant tax year.

What Should Businesses Do Now?

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Although final HMRC guidance is still expected, employers can start preparing by reviewing their current benefits and checking where the biggest practical changes will be.

A sensible first step is to create a simple benefits register showing each benefit provided, who receives it, how it is currently reported and whether it is likely to fall into phase one or phase two.

This can help avoid last-minute issues and make it easier to discuss payroll software changes, employee queries and compliance deadlines with your accountant or payroll provider.

Final Takeaway

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HMRC’s phased approach gives employers more breathing space, but it also creates a transitional period where both payroll reporting and P11D reporting may be needed.

Businesses should use the extra time wisely by reviewing employee benefits now, checking payroll readiness and keeping an eye on HMRC’s final guidance.