A significant change to the reporting of employee benefits in kind is finally expected to take effect from April 2027.
Benefits such as company cars and private medical insurance are currently generally reported to HMRC after the end of the tax year using annual P11D forms. The Government has discussed replacing this process for several years, with implementation having previously been postponed.
From 6 April 2027, the first phase of mandatory payrolling will begin. This will initially apply to:
- Company cars
- Car fuel
- Vans
- Van fuel
- Employer-provided medical benefits
Instead of reporting these benefits annually, employers will need to include their taxable value through payroll throughout the year. The employee will therefore pay the associated income tax more closely alongside receiving the benefit.
The P11D forms prepared after the end of the 2026/27 tax year should therefore be the final annual forms for benefits included within this first phase.
Most remaining benefits in kind are expected to move into mandatory payrolling from April 2028. Employment-related loans and accommodation will continue to be treated separately for the time being.
This represents a significant change for employers, payroll teams and software providers. Accurate and timely information will need to be available throughout the year rather than being gathered only after the tax year has ended.