HMRC has confirmed that mandatory payrolling of benefits in kind (BiKs) will now be introduced in two phases, starting from 6 April 2027. This change will move the reporting of most benefits away from annual P11Ds and into real-time payroll, resulting in Income Tax and Class 1A National Insurance being reported through the payroll each pay period (e.g. weekly or monthly).

From April 2027, the first phase will apply to: 

  • Company cars and car fuel
    • Vans and van fuel
    • Employer-provided medical benefits.

From April 2028, most other benefits will be brought into the regime, although beneficial loans and employer-provided living accommodation will remain voluntary. 

Under the new system, employers will report benefits through payroll each pay period using RTI, rather than reporting them after the year end. While this change will reduce the need for year-end forms, it increases the importance of getting payroll right throughout the year. Errors will be picked up more quickly, and corrections may need to be made in real-time.

There is still time to prepare. HMRC is continuing to work with software providers and will release further technical guidance during 2026, with final details expected ahead of the Autumn Budget. 

Employers should start planning now. Review the benefits you currently provide and identify which will fall into the first phase.  This is a significant shift in how benefits are taxed and reported. Preparing early will reduce disruption and make the transition much smoother.

Please get in touch if you would like help reviewing your benefits or preparing your payroll systems for these changes.