Update on Payrolling Benefits

HM Revenue and Customs (HMRC) has updated the interim guidance for mandatory payrolling to announce a new phased approach for all reportable Benefits in Kind (BiKs) and expenses from April 2027.

Delivery of this change will now take place in two phases. Under Phase 1, from April 2027, the below benefits will be mandatory to payroll.

• company cars and fuel
• vans and van fuel
• private medical benefits.

All other Benefits in Kind (BiKs) will continue to be reported via P11D forms or through voluntary payrolling for the time being. The Government’s intention is to introduce mandatory payrolling for most remaining benefits from April 2028, with loans and accommodation benefits to follow at a later stage.

Under payrolling arrangements, the taxable value of benefits and expenses will be reported through the Full Payment Submission (FPS), enabling Income Tax and Class 1A National Insurance contributions to be accounted for in real time.

HMRC has confirmed that employers who have already chosen to payroll all benefits can continue to do so. However, at present, only company cars, vans, and private medical insurance will have dedicated FPS reporting fields. Any additional benefits processed via payrolling will continue under the voluntary framework, and formal registration with HMRC is still expected to be required.

If you need assistance in this area, please contact Amanda Cooley using the details below.