HMRC has announced revised plans for the mandatory payrolling of Benefits in Kind – recently confirming a new phased introduction from April 2027. The updated timetable gives employers additional time to prepare, but with significant changes still on the horizon, now is the time to review your processes and understand what the new rules mean for your business.
With the right preparation there's no need to be caught off guard - here's what employers need to know.
Many Yorkshire businesses will already be familiar with Benefits in Kind (BiKs), whether that's company cars, private medical insurance or other employee perks.
The way these benefits are reported to HMRC is changing, but employers have been given a little more breathing space.
Following feedback from businesses, payroll providers and professional bodies, HMRC has pushed back the introduction of mandatory payrolling of some BiKs from April 2026 to April 2027. This gives employers an extra year to prepare for what is one of the biggest payroll reporting changes in recent years.
What is changing?
Currently, most BiKs are reported to HMRC after the end of the tax year using P11D forms. Employees then typically pay any tax due through adjustments to their tax code.
From 6 April 2027, some BiKs will need to be reported and taxed through payroll in real time - this means employees will pay the tax on benefits as they receive them, rather than retrospectively.
Mandatory payrolling from 2027 will now only apply to:
- Cars
- Car fuel
- Vans
- Van fuel
- Medical benefits
Employment-related loans and living accommodation benefits will continue to have separate reporting requirements for the time being, currently set to move over to the new system in 2028.
Why has HMRC delayed the changes?
The original plan was to introduce mandatory payrolling from April 2026. However, concerns were raised about the readiness of payroll systems, software providers and employers.
Industry feedback highlighted practical challenges around real-time reporting, particularly where benefit information is received after the end of a tax year or from third-party providers. In a welcome move for many businesses, HMRC has delayed implementation by 12 months to allow businesses more time to prepare.
What should employers be doing now?
Although the deadline has moved, this isn't a change to leave until the last minute.
Now is a good opportunity to review:
Your employee benefits
Make sure you have a clear picture of every benefit provided across the business. Some benefits may sit outside payroll or HR systems, making them harder to track accurately.
Your payroll processes
Real-time reporting will require more accurate and timely information throughout the year. Employers should assess whether existing payroll processes can support the new requirements.
Your payroll software
Not all systems are configured in the same way. Speak with your payroll provider or adviser to understand what updates may be needed before April 2027.
Employee communications
Many employees don't realise how BiKs are currently taxed. When the changes arrive, take-home pay may look different, even though the overall tax position remains broadly the same. Clear communication will help avoid confusion.
The opportunity behind the compliance
At first glance, this may feel like another compliance burden. But businesses that prepare early can use the transition to improve payroll accuracy, strengthen reporting and gain better visibility over employee benefits. As with most regulatory changes, planning ahead usually leads to a smoother transition.
How Fortus can help
Understanding the impact of mandatory payrolling is important now, not in spring 2027. At Fortus, we help ambitious Yorkshire businesses navigate tax, payroll and compliance changes with confidence.
By bringing together payroll, tax and business advisory expertise, we can help you understand the wider impact on your business and prepare for the changes ahead.
If you'd like to discuss what mandatory payrolling means for your organisation, our team is here to help.
Reach out any time - we’re ready to support you.
