Mandatory Payrolling of Benefits: Now Pushed to 2027 — What It Means for You

A small reprieve for small businesses

HMRC has confirmed that the planned move to make payrolling of benefits in kind compulsory has been delayed until 6 April 2027 — giving employers an extra year to prepare.

Initially expected in April 2026, this change will mean that, from 2027, all benefits in kind (think company cars, medical insurance, gym memberships and similar perks) must be reported through payroll, rather than via annual P11D forms.

What’s changing

From 6 April 2027:

• Employers will no longer be able to submit P11D forms for most benefits.

• Benefits will be taxed in real time via payroll.

• This covers both directors and employees.

The only expected exceptions are:

• Employer-provided living accommodation, and

• Interest-free or low-interest loans (sometimes called beneficial loans).

These will still need separate reporting, at least for now.

Why HMRC is doing it

The goal is simplification: fewer forms, less end-of-year admin, and more accurate tax deductions during the year. But in reality, it’s an extra setup task for small employers who currently handle benefits just once annually.

What you should do before 2027

1. Review what benefits you provide (medical cover, car allowances, gift cards, etc.).

2. Check your payroll software – does it support payrolling benefits yet?

3. Decide whether to start early – you can voluntarily payroll benefits right now.

4. Tell your team – staff should understand that their payslip will reflect taxable benefits.

5. Keep an eye on HMRC updates – detailed rules and exclusions are still being finalised.

A quick reminder

You can still register voluntarily to payroll benefits before 2027 – it can actually make life easier once you’re set up.

👉 Register via your HMRC online account under “Payrolling employees’ taxable benefits and expenses”.

Our take

This delay is good news for small employers who already feel stretched by MTD and the Companies House verification rules landing next year.
If you’d like help checking whether your payroll setup supports benefits reporting, drop us a message — we can show you how to get ahead without adding chaos to 2026’s to-do list.