Prepare for mandatory payrolling of benefits in kind
Find out how to report benefits in kind and expenses in real time through payroll software, from April 2027.
Who needs this guidance
You need this guidance if you are an employer reporting employee benefits in kind and expenses to HMRC.
You also need this guidance if you:
- provide payroll services or workplace benefits advice to employers
- develop payroll software
- provide benefits in kind to employers
- are a tax agent
What will change
From 6 April 2027, as an employer you must report these benefits in kind through your payroll on your Full Payment Submission:
- company cars and fuel
- company vans and fuel
- medical insurance
You can also voluntarily payroll other benefits in kind by registering for the online service before the next tax year starts.
You must deduct Income Tax and Class 1A National Insurance contributions for all mandatory and voluntarily payrolled benefits in real time using payroll software.
You will not need to report payrolled benefits using the P11D and P11D(b) forms.
Existing benefit valuation, making good and exemption rules will continue to apply. HMRC will continue to collect year-end underpayments through existing processes.
All other benefits except loans and accommodation must be payrolled from 6 April 2028.
What you should do now
As an employer, you should:
- review all benefits and expenses currently reported on P11D forms
- review your payroll, HR and benefits administration processes
- check that your payroll software provider has been set up for changes in reporting
You should tell your employees that:
- tax on payrolled benefits will be collected during the year through payroll
- their tax codes will not include adjustments for payrolled benefits
- they may see changes to their payslips and take-home pay
- they will not pay more tax because of this change
- you will give them an annual payrolled benefits statement after the end of the tax year
Find out more about getting ready for mandatory payrolling of benefits in kind.
Reporting benefits in real time
Find out how to report a benefit in kind in real time.
Learn more about common payrolling scenarios that employers deal with. You can also read detailed payrolling examples for all the benefits that you’ll need to payroll from April 2027.
How to deal with changes
Find out what to do when:
- you cannot collect the full amount of tax
- you need to make corrections or adjustments
- employees leave during the tax year
Employees who are exempt from mandatory payrolling of benefits
Globally mobile employees, if eligible, are exempt from mandatory payrolling of benefits in kind. You’ll need to apply for an exception by 5 April 2027.
Contact us
The guidance in the interim guidance and legislation manual provides detailed information to help you prepare for mandatory payrolling.
If you have any feedback about the changes, email policyemploymentbenefitsexpenses@hmrc.gov.uk. We will not be able to respond directly to emails, but your feedback will be considered for future updates.
If you have questions about your own tax affairs, contact HMRC.