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Most UK employers still report their employees' benefits in kind after the tax year, on form P11D, and HMRC collects the tax later through each employee's tax code. That is changing. From 6 April 2027, the most common benefits must be reported and taxed through payroll software in real time, and most other benefits follow from 6 April 2028. On 5 November 2026 HMRC reopened its online service for employers who want to payroll benefits voluntarily, and it now accepts employer-provided living accommodation and loans.
This affects Pakistani and Gulf groups whose UK subsidiaries or branches give UK staff a company car, private medical cover or other benefits.
The timetable
| Date | What happens |
|---|---|
| 5 November 2026 | HMRC's voluntary payrolling service reopens for registrations and cancellations. Living accommodation and loans can now be payrolled. |
| Before 6 April 2027 | Register any benefits you want to payroll voluntarily in the 2027-28 tax year. You cannot change how you report a benefit part-way through a tax year. |
| 6 April 2027 | Payrolling becomes mandatory for company cars, vans, car and van fuel, and medical benefits. |
| 6 April 2028 | Most remaining benefits in kind must also be payrolled. |
Company cars and fuel, vans and fuel, and medical insurance cannot be registered through the voluntary service. HMRC's guidance says to report these through your payroll software.
What stays outside the mandate
- Employer-provided loans and living accommodation. Employers told the government these are particularly burdensome to payroll, so they are not mandated. Employers can still payroll them voluntarily by registering through the reopened service. Otherwise they stay on the P11D.
- Benefits of globally mobile employees. These stay outside mandatory payrolling while HMRC develops an approach. Employers will have to register these employees with HMRC. HMRC estimates that up to 235,000 employees and 21,000 employers are affected.
End-of-year reporting continues for these benefits and employees until they are brought into scope or other arrangements are confirmed. Groups that second staff between Pakistan, the Gulf and the UK should expect to run both payroll and P11D reporting for a while.
How payrolling a benefit works
- Work out the cash equivalent of each benefit in the same way as for a P11D. If you do not know the value at the start of the year, estimate it and adjust later.
- Spread the cash equivalent over the paydays in the year and add it to taxable pay. In HMRC's example, a company car with a cash equivalent of £5,200 adds £433.33 to taxable pay each month for a monthly-paid employee.
- Deduct Income Tax through PAYE. You must not deduct more than 50% of the employee's cash pay in tax (the overriding limit). Any tax you cannot collect carries forward to later paydays.
- HMRC removes the benefit from the employee's tax code so that it is not taxed twice.
- Under HMRC's guidance, tell employees in writing (by payslip, email or letter) by 1 June after the tax year which benefits you payrolled and their value.
What happens to forms P11D and P11D(b)
| Tax year | Benefits you payroll |
|---|---|
| 2026-27 | Income Tax goes through payroll. Class 1A National Insurance is worked out after the year on form P11D(b), due by 6 July 2027. No P11D is needed for the payrolled benefit. |
| 2027-28 onwards | Income Tax and Class 1A National Insurance are dealt with in real time through payroll software. No P11D or P11D(b) is needed for payrolled benefits. |
Benefits that are not payrolled still need an electronic P11D for each employee concerned. If you exclude an employee from a payrolled benefit, you cannot add them back in the same tax year. Regulations will set out the detailed rules, including how to correct errors.
Tax codes, underpayments and penalties
If you payroll benefits, HMRC will automatically remove the estimated benefit adjustment from employees' tax codes before mandatory payrolling starts on 6 April 2027. Underpayments from earlier years are still collected through the existing process. So in the first two years, some employees may pay tax on this year's benefits through payroll and on an earlier year's benefits through their tax code. HMRC says such overlaps generally relate to different tax years, not double taxation of the same benefit, and that employees in financial difficulty can contact it.
The new legislation will allow penalties not to be charged for non-deliberate inaccuracies in the 2027-28 tax year, the first year of the new rules.
What UK employers should do now
- List every benefit in kind you give UK staff, and which employees receive each one
- Ask your payroll software provider to confirm it can payroll benefits and Class 1A National Insurance in real time from April 2027
- Work out 2027-28 cash equivalents for company cars, vans, fuel and medical cover
- Decide whether to payroll other benefits, including loans and accommodation, voluntarily from 2027-28, and register before 6 April 2027 if you will
- Identify globally mobile employees and plan to keep their benefits on the P11D for now
- Explain to employees how their tax codes and payslips will change
- Keep 6 July 2027 in the diary for the 2026-27 form P11D(b)
For the other payroll changes from April 2027, including the new minimum wage rates, see our note on UK Budget 2026. If you plan to change or withdraw benefits, check the fire and rehire rules coming in March 2027 first.
Official sources
- HMRC — How to use the voluntary payrolling benefits and expenses online service, updated 5 November 2026
- HMRC — Voluntarily payrolling employees' benefits and expenses, updated 5 November 2026
- HMRC — Mandatory reporting of benefits in kind in Real Time Information (RTI) from April 2027, updated 28 October 2026
Frequently asked questions
Which benefits must UK employers payroll from April 2027?
Company cars, vans, car and van fuel, and medical benefits, from 6 April 2027. Most remaining benefits in kind follow from 6 April 2028. Employer-provided loans and accommodation, and benefits of globally mobile employees, are outside the mandate for now.
Can UK employers payroll loans and accommodation?
Yes, voluntarily. Since 5 November 2026, HMRC's voluntary payrolling service accepts living accommodation and loans. You must register before the start of the tax year you want to payroll them in, so before 6 April 2027 for 2027-28.
Will UK employers still need to file P11D forms?
Not for benefits payrolled from 6 April 2027: Income Tax and Class 1A National Insurance on those are dealt with through payroll. Benefits that are not payrolled still need an electronic P11D for each employee.
This guide is general information based on the law as we understand it on the date shown, not advice for your situation. Tax rules change often — please speak to us before acting on it. See our disclaimer.