HMRC are introducing mandatory payrolling of most benefits in kind from April 2027.

This was originally planned to take place from 6th April 2026, but the new regime will now go live in April 2027.

A benefit in kind is remuneration paid to an employee which is not paid to them in their pay such as private health insurance, company cars and gym membership.

Benefits in kind can be a tax effective way of incentivising and rewarding employees.

Up until now benefits in kind were reported to HMRC at year end using a P11D form dealt with by the employer or accountant. The employee would then have their tax code adjusted for the taxable benefit the following tax year.

Payrolling benefits in kind will mean that these tax adjustments are made in payroll as they occur meaning the tax is collected much earlier than currently.

HMRC expect employers to add benefits during the tax year when they arise and collect the tax across remaining pay periods. The yearly value of the benefit needs to be worked out and divided by the number of pay periods in the year. This amount is taxed each period.

If there are any changes to the benefit amount throughout the year, the amount can be adjusted.

It passes the administration burden onto payroll providers to process this on behalf of employers. It is therefore essential that employers pass on to payroll providers the data immediately.

With limited exceptions, form P11D and P11D(b) will no longer be required. Employers providing accommodation and beneficial (interest free or low interest) loans may still be reported via form P11D.

Payrolling Benefits in Kind has been trialled by HMRC for the last couple of years. Currently employers must register to payroll benefits in kind at HMRC before the start of the tax year they are to be used in. Registration is done online using this link  https://www.gov.uk/guidance/payrolling-tax-employees-benefits-and-expenses-through-your-payroll

To avoid a last minute rush we are recommending any employer with benefits in kind register now before 5^th April 2026 so the service can be used before becoming mandatory in April 2027 and to let us know.