Employers preparing for the introduction of mandatory payrolling of Benefits in Kind (BiKs) have been given additional breathing space, with HMRC confirming the reforms will now be introduced in two phases.
Rather than bringing all taxable benefits into payroll from April 2027, HMRC will stagger the rollout, allowing businesses more time to adapt their payroll processes, systems and reporting.
While the overall direction of travel remains unchanged, the phased approach recognises the practical challenges many employers face in moving from annual P11D reporting to real-time payroll reporting.
What has changed?
HMRC has confirmed that mandatory payrolling will now be introduced in two stages.
From April 2027, mandatory payrolling will apply to:
- Company cars
- Car fuel
- Vans
- Van fuel
- Employer-provided medical benefits
From April 2028, the requirements will extend to most remaining Benefits in Kind and taxable expenses.
Employment-related loans and accommodation benefits will remain outside the mandatory regime for now, with voluntary payrolling continuing to be available for these benefits.
Alongside the phased implementation, HMRC is updating the Real Time Information (RTI) reporting framework, introducing new payroll data requirements and removing many of the fields previously associated with P11D reporting.
Why the phased approach matters
For many employers, this is more than a simple change in reporting.
Moving Benefits in Kind into payroll requires accurate benefit information throughout the tax year, rather than collecting it retrospectively after the year end. That often means changes to internal processes as much as changes to payroll software.
The additional year for most benefits should allow businesses to spread the workload, prioritising the benefits that fall within the first phase before expanding their processes ahead of April 2028.
However, the delay should not be viewed as an opportunity to postpone planning altogether.
Businesses with multiple benefit types, complex remuneration packages or large workforces may still need significant time to review existing processes, implement software updates and ensure payroll, HR and finance teams are working from the same information.
What employers should be doing now
Although the first mandatory deadline remains some way off, now is a good opportunity to assess how prepared your business is.
Key areas to review include:
- Identifying which Benefits in Kind fall within the 2027 and 2028 phases.
- Confirming your payroll software provider’s timetable for supporting the new reporting requirements.
- Reviewing how benefit information is collected and whether it can be captured throughout the year rather than after the year end.
- Ensuring payroll, HR and finance teams understand their respective responsibilities under the new regime.
- Considering whether voluntary payrolling ahead of the mandatory deadlines would help smooth the transition.
Planning ahead will reduce disruption
The move to mandatory payrolling remains one of the biggest changes to employment tax reporting in recent years.
While the phased rollout gives employers additional flexibility, businesses that use the extra time to review systems and strengthen internal processes are likely to find the transition significantly easier than those leaving preparations until the final months.
If you’d like to discuss how the phased rollout could affect your business, or review your current Benefits in Kind reporting processes, our payroll and tax specialists are here to help.
