Mandatory Payrolling of Benefits in Kind — Confirmed Dates and What to Do Now June 18, 2026 Kieron McGahan Post in Uncategorized Mandatory Payrolling of Benefits in Kind — Confirmed Dates and What to Do Now HMRC announced this week that mandatory payrolling of benefits in kind (BIK) will be introduced in phases rather than all at once from April 2027. The change follows concerns from ICAEW and others about the pace of implementation and the readiness of software providers. The revised timetable 6 April 2027 — Company car, van, fuel and medical benefits become subject to mandatory payrolling 6 April 2028 — Most other benefits come within scope (excluding employment-related loans and accommodation) Loans and accommodation — Remain voluntary indefinitely; their in-year valuation is complex enough that HMRC is not mandating these for now Some employers are already payrolling benefits voluntarily — for them, the mandatory regime is largely a formalisation of existing practice. But many aren’t, and this is aimed at them. What mandatory payrolling actually means Currently, most employers report BIK to HMRC on form P11D after the end of the tax year, with Class 1A NIC paid around the same time. HMRC then adjusts the employee’s tax code to collect income tax going forward. Under mandatory payrolling, both income tax and Class 1A NIC will be collected via PAYE real time information (RTI) during the tax year. The P11D will no longer be required for benefits within scope — reporting and payment happen in real time. HMRC is still working through how Class 1A NIC will be calculated and reported in real time, and further guidance is expected. This is worth monitoring, as the approach will affect payroll configuration. What to do now Talk to your payroll provider — or check your own software. If payroll is outsourced, ask your provider directly whether they have a roadmap for RTI-based BIK reporting and when they’ll be ready. If you run payroll in-house, check with your software supplier. Either way, don’t assume it will happen automatically. This is also a reasonable point to benchmark. If there’s already friction in the relationship — costs that aren’t justified, payslips that don’t meet employee expectations, limited self-service, or journals that don’t land cleanly in your accounting system — mandatory payrolling is a natural trigger to review whether your current provider is still the right fit. It’s also worth considering whether payroll needs to stay outsourced at all. Cloud-based payroll software has moved on significantly — tools like BrightPay offer journal exports that feed directly into your accounting software, employee self-service for payslips and documents, and are straightforward to set up and run. If you’re already reviewing your current arrangements, bringing payroll in-house may be more accessible than you think. If you’d prefer to hand it over entirely, that’s something we can help with too. Audit what you’re currently not payrolling. P11D is a once-a-year exercise. Payrolling requires benefit values to be in the system during the year, in real time. That changes how and when you collect information — from employees, fleet managers, insurers. Look at your data flows. Who tells payroll when a company car is allocated? When is fuel benefit confirmed? It’s also worth looking at where that information currently lives — whether it’s pulled from a fleet management system, your accounting software, or a spreadsheet that someone updates periodically. Informal processes that work well enough for an annual return may not hold up for real-time reporting. A note on voluntary payrolling Most benefits in kind can already be payrolled voluntarily — the exceptions are employment-related loans, living accommodation and certain vouchers. If you provide any of the April 2027 benefits and are not already payrolling them, now is a reasonable point to consider making the switch ahead of the deadline rather than waiting for the mandate. The broader point HMRC guidance on real-time Class 1A NIC calculation is still to come — worth monitoring, as it will affect payroll configuration. April 2027 is closer than it looks — software development cycles, year-end windows and testing periods mean preparation needs to start now. But there’s a broader point here too. Manual benefit tracking and year-end P11D processing is overhead that most businesses would rather not carry. The employers who use this as a prompt to review their processes and systems properly — rather than just meeting the minimum requirement — are the ones who’ll come out of it in better shape. Next steps If you have questions about how mandatory payrolling will affect your business, or want to review your current benefit arrangements and payroll processes, get in touch. Source: HMRC draft guidance — The phased introduction of mandatory payrolling for benefits in kind
Mandatory Payrolling of Benefits in Kind — Confirmed Dates and What to Do Now HMRC announced this week that mandatory payrolling of benefits in kind (BIK) will be introduced in phases rather than all at once from April 2027. The change follows concerns from ICAEW and others about the pace of implementation and the readiness of software providers. The revised timetable 6 April 2027 — Company car, van, fuel and medical benefits become subject to mandatory payrolling 6 April 2028 — Most other benefits come within scope (excluding employment-related loans and accommodation) Loans and accommodation — Remain voluntary indefinitely; their in-year valuation is complex enough that HMRC is not mandating these for now Some employers are already payrolling benefits voluntarily — for them, the mandatory regime is largely a formalisation of existing practice. But many aren’t, and this is aimed at them. What mandatory payrolling actually means Currently, most employers report BIK to HMRC on form P11D after the end of the tax year, with Class 1A NIC paid around the same time. HMRC then adjusts the employee’s tax code to collect income tax going forward. Under mandatory payrolling, both income tax and Class 1A NIC will be collected via PAYE real time information (RTI) during the tax year. The P11D will no longer be required for benefits within scope — reporting and payment happen in real time. HMRC is still working through how Class 1A NIC will be calculated and reported in real time, and further guidance is expected. This is worth monitoring, as the approach will affect payroll configuration. What to do now Talk to your payroll provider — or check your own software. If payroll is outsourced, ask your provider directly whether they have a roadmap for RTI-based BIK reporting and when they’ll be ready. If you run payroll in-house, check with your software supplier. Either way, don’t assume it will happen automatically. This is also a reasonable point to benchmark. If there’s already friction in the relationship — costs that aren’t justified, payslips that don’t meet employee expectations, limited self-service, or journals that don’t land cleanly in your accounting system — mandatory payrolling is a natural trigger to review whether your current provider is still the right fit. It’s also worth considering whether payroll needs to stay outsourced at all. Cloud-based payroll software has moved on significantly — tools like BrightPay offer journal exports that feed directly into your accounting software, employee self-service for payslips and documents, and are straightforward to set up and run. If you’re already reviewing your current arrangements, bringing payroll in-house may be more accessible than you think. If you’d prefer to hand it over entirely, that’s something we can help with too. Audit what you’re currently not payrolling. P11D is a once-a-year exercise. Payrolling requires benefit values to be in the system during the year, in real time. That changes how and when you collect information — from employees, fleet managers, insurers. Look at your data flows. Who tells payroll when a company car is allocated? When is fuel benefit confirmed? It’s also worth looking at where that information currently lives — whether it’s pulled from a fleet management system, your accounting software, or a spreadsheet that someone updates periodically. Informal processes that work well enough for an annual return may not hold up for real-time reporting. A note on voluntary payrolling Most benefits in kind can already be payrolled voluntarily — the exceptions are employment-related loans, living accommodation and certain vouchers. If you provide any of the April 2027 benefits and are not already payrolling them, now is a reasonable point to consider making the switch ahead of the deadline rather than waiting for the mandate. The broader point HMRC guidance on real-time Class 1A NIC calculation is still to come — worth monitoring, as it will affect payroll configuration. April 2027 is closer than it looks — software development cycles, year-end windows and testing periods mean preparation needs to start now. But there’s a broader point here too. Manual benefit tracking and year-end P11D processing is overhead that most businesses would rather not carry. The employers who use this as a prompt to review their processes and systems properly — rather than just meeting the minimum requirement — are the ones who’ll come out of it in better shape. Next steps If you have questions about how mandatory payrolling will affect your business, or want to review your current benefit arrangements and payroll processes, get in touch. Source: HMRC draft guidance — The phased introduction of mandatory payrolling for benefits in kind