What the HMRC delay to mandatory payrolling of benefits means for employers
HMRC has delayed and phased the mandatory payrolling of benefits in kind. From 6 April 2027, only company cars and car fuel, vans and van fuel, and employer-provided medical benefits will have to be reported through payroll in real time. Most other taxable benefits will follow from April 2028, while beneficial loans and employer-provided living accommodation will stay outside mandatory payrolling for now.
The start date has already moved from April 2026 to April 2027, so employers have more breathing room. That does not mean the work has gone away. It means payroll, HR and finance teams have time to clean up benefit records before the rules arrive.
If you currently report everything once a year on P11D forms, this is mainly a change in rhythm rather than a change in what is taxable. Payrolling spreads the taxable value of a benefit across the year and taxes it through payroll, rather than collecting tax later through a tax code adjustment. Our note on payrolling benefits versus P11Ds walks through the practical difference, and if you want the basics first, here is how benefits in kind are taxed.
What changed, and why
Under the earlier plan, employers faced a larger real-time reporting change in one go. After feedback from payroll bodies, software developers and employers, HMRC has narrowed phase 1 to the most common benefits and reduced the first-year data burden. HMRC says 94 RTI data fields are being removed from the first phase specification, with updated technical detail due as the rules develop.
| Phase | Starts | Benefits covered |
|---|---|---|
| Phase 1 | 6 April 2027 | Company cars and car fuel, vans and van fuel, and employer-provided medical benefits |
| Phase 2 | April 2028 | Most remaining taxable benefits in kind |
| Later or voluntary | Date not confirmed | Beneficial loans and living accommodation remain outside mandatory payrolling for now |
Who this affects first
Think about a small property firm that gives its maintenance team 2 company vans. From April 2027, those vans and any van fuel benefit move into payroll reporting. The same applies to a company car provided to a director, or private medical cover offered to staff. If you run a residential property management accounting operation, these are exactly the benefits caught in phase 1.
Landlords who employ people directly should also take note. If you have grown beyond doing everything yourself, a landlord accountant can check whether any benefits you provide fall inside the first wave. Vehicle benefits sit at the heart of phase 1, so it is worth reading our summary of the recent HMRC payroll and mileage changes alongside this.
Need Expert Accounting Advice?
If you are unsure about tax, bookkeeping, payroll, property accounts or business finances, speak to the team at FHP Accounting for clear, practical guidance.
The transition will not be tidy
Between April 2027 and April 2028, many employers may run 2 systems at once. Phase 1 benefits will be payrolled, while other benefits may still be reported through the P11D filing deadline process. P11Ds do not vanish overnight. For 2026/27 benefits, employers should still expect the usual 6 July 2027 reporting deadline, unless HMRC changes the rules.
Class 1A National Insurance is part of this too. From April 2027, Class 1A on mandatorily payrolled benefits will be reported and paid in real time through payroll. But employers will also still have to settle Class 1A on 2026/27 benefits under the old annual system in July 2027. If the recent rise in employer National Insurance has already stretched your budget, this one-off overlap is worth planning for.
A few steps are worth taking now:
- Review every benefit you provide and flag anything in phase 1.
- Ask your payroll software provider how they are preparing for April 2027.
- Tidy benefit, vehicle, fuel and medical insurance records.
- Plan how you will explain payslip changes to employees.
- Build the Class 1A timing change into your cash flow.
You do not need to register to payroll the mandatory phase 1 benefits from April 2027. HMRC says employers will need to register only if they want to voluntarily payroll beneficial loans or accommodation from 2027/28. That service is due to open in November 2026, with a registration deadline of 5 April 2027. HMRC’s interim guidance on payrolling benefits is being updated as the detail firms up.
Where a bit of help pays off
Most of the pain here is data, not tax. Clean records make real-time reporting almost routine, which is the point. If your team is stretched, an outsourced finance department can carry the payroll and reporting side while you run the business. Newer employers setting up systems from scratch may prefer talking to accountants for start-ups before bad habits set in.
Frequently asked questions
Is payrolling of benefits in kind mandatory?
Yes, but in stages. Phase 1 starts on 6 April 2027 for company cars, car fuel, vans, van fuel and employer-provided medical benefits.
Do I still need to file a P11D?
For now, yes. Benefits not yet payrolled, plus loans and accommodation, may still need P11D reporting.
What happens to Class 1A National Insurance?
Class 1A on mandatorily payrolled benefits will move into real-time payroll reporting from April 2027.
Can I start payrolling loans and accommodation early?
Yes. HMRC says voluntary registration for loans and accommodation opens in November 2026 for 2027/28.
Get your payroll ready before 2027
We are accountants in Nottingham who handle payroll and benefits reporting day in, day out. If you want your systems ready well before April 2027, get in touch and we will map out the steps with you.
I lead FHP Accounting, an accountancy practice specialising in Commercial and Residential Property Accounting. Our goal is to make the administration of running property portfolios easier for landlords, managers, and investors — allowing you to focus on what you do best, while we take care of everything behind the scenes.
Need Expert Accounting Advice?
If you are unsure about tax, bookkeeping, payroll, property accounts or business finances, speak to the team at FHP Accounting for clear, practical guidance.
