HMRC has confirmed a significant change to the rollout of mandatory payrolling for Benefits in Kind (BiKs).
Following feedback from employers, payroll professionals and software providers, the government will now introduce the new regime in phases rather than applying it to all benefits at once from 6 April 2027.
Under the revised approach, mandatory payrolling from 6 April 2027 will apply only to company cars and car fuel, vans and van fuel, and employer-provided medical benefits. Most other benefits will continue to be reported in the usual way on form P11D, unless the employer chooses to payroll them voluntarily. HMRC’s current plan is for most of those remaining benefits to move into mandatory payrolling from 6 April 2028, while loans and accommodation will remain outside the mandatory regime until a later date.
This will be welcome news for many employers. Mandatory payrolling represents a major shift in how taxable benefits and associated Class 1A National Insurance contributions are reported, moving the process into real time through payroll submissions rather than relying on year-end forms. The phased approach gives businesses more time to review their benefits data, test internal processes, speak with payroll providers and prepare employee communications ahead of implementation.
It should also reduce some of the immediate administrative pressure on employers and software developers. HMRC has indicated that the first phase will require far fewer real time reporting fields than originally proposed, which should help make implementation more manageable in practice. However, this is still not a change businesses can afford to leave until the last minute. Employers with company car, van or private medical benefits should begin reviewing their current reporting arrangements now to understand what data will need to flow through payroll from April 2027.
There are also some useful points to note for businesses considering voluntary payrolling. HMRC has said employers will not need to register for benefits that become mandatory from April 2027, but those wanting to voluntarily payroll loans or accommodation for 2027/28 will be able to register from November 2026. In parallel, HMRC will need employers to communicate the changes clearly to employees, particularly where tax codes and take-home pay may be affected.
Although the delay and phased rollout will be seen by many as a practical step, it does not remove the need for early planning. Employers should use the extra time to assess which benefits they provide, confirm how those benefits are currently reported, and identify any system or process changes needed before the new rules take effect.
If your business provides company cars, vans or private medical cover, now is the time to start preparing. Hillier Hopkins can help you review your current benefits reporting, understand how the phased introduction affects you, and plan the steps needed for a smooth transition. If you would like advice tailored to your business, please get in touch with our team.
