If your business provides its employees with benefits on top of their pay, such as a company car or employer-provided medical benefits, the way those benefits are reported to HMRC is changing. The mandatory payrolling of Benefits in Kind and taxable employment expenses will come into force on 6 April 2027.
The change is being brought in over two phases, so not every benefit is affected on the same date. Here is what is changing, which benefits fall into each phase and what stays as it is.
What is changing?
From 6 April 2027, Income Tax and Class 1A National Insurance Contributions (NICs) on Benefits in Kind (BIK) and taxable employment expenses must be reported through Real Time Information (RTI).
The important word is mandatory. For the benefits included in each phase, payrolling becomes a requirement and is no longer a choice for the employer.
Phase 1: from April 2027
The first phase of mandatory payrolling will commence from April 2027. It will include:
- Company cars and fuel
- Vans and van fuel
- Employer-provided medical benefits
If you provide any of these to your employees, this first phase is the one to prepare for.
Phase 2: from April 2028
The second phase will commence a year later, from April 2028, and will include most other Benefits in Kind. Other, more complex Benefits in Kind will follow suit from April 2028.
What will stay voluntary
There are two exceptions to Phase 2:
- Beneficial loans
- Living accommodation
Payrolling these two benefits will continue to be voluntary.
No penalties for non-deliberate inaccuracies in the first year
Penalties will not be charged for non-deliberate inaccuracies for the first year that the rules are in force.
It is worth noting the two limits on that. It covers inaccuracies that are not deliberate, and it lasts for the first year only, so it is still worth getting your reporting right from the start.
The key dates at a glance
- 6 April 2027: mandatory payrolling comes into force. Phase 1 includes company cars and fuel, vans and van fuel, and employer-provided medical benefits.
- April 2028: Phase 2 includes most other Benefits in Kind.
- Continuing to be voluntary: beneficial loans and living accommodation.
What this means for employers
If you provide Benefits in Kind or pay taxable employment expenses, it is worth checking now which phase each one falls into, so that you know the date that applies to you. An employer that provides company cars, vans or medical benefits is affected from April 2027. For most other benefits, the date is April 2028.
Need more information?
Please contact us for further information on how mandatory payrolling will affect your business. Call us on 01202 311 311 or get in touch. You can also read more about our payroll service.
Common Questions
When does mandatory payrolling of benefits start?
The mandatory payrolling of Benefits in Kind and taxable employment expenses comes into force on 6 April 2027. Phase 1 commences from April 2027 and Phase 2 from April 2028.
Which benefits are included in Phase 1?
Phase 1 covers company cars and fuel, vans and van fuel, and employer-provided medical benefits.
Are any benefits left out of mandatory payrolling?
Yes. Beneficial loans and living accommodation are the exceptions. Payrolling these will continue to be voluntary.
Will there be penalties for getting it wrong?
Penalties will not be charged for non-deliberate inaccuracies for the first year that the rules are in force.
