HMRC has said that company car, van, fuel and medical benefits will be payrolled from 6 April 2027, with all other benefits to follow in 2028, except for loans and accommodation which remain voluntary until further notice.

The previous government announced that benefits in kind were to be payrolled on a mandatory basis from 6 April 2026. However, this was delayed until 6 April 2027 to allow employers, payroll providers and software developers more time to get ready and for HMRC to consult on technical specifications and guidance.

Adelle Greenwood, ICAEW Tax Manager, said:

“We are pleased that HMRC has listened to feedback from stakeholders on the timescale for implementation and on the technical specifications previously made available to payroll software providers. The reduction in the number of RTI data fields required under the first phase will make the rollout of this phase simpler to deliver.

“We believe this phased approach will help employers and businesses ease into mandatory payrolling of benefits from 6 April 2027, enabling commonly-provided benefits with known tax values to be payrolled in the first instance, while allowing employers time to adjust their data collation and process flows for other benefits they might offer.”

Company cars, vans, fuel, and medical benefits represent a large proportion of the benefits in kind that are provided to employees. Capturing the tax and national insurance due in real time will be a huge step towards real-time reporting of benefits, which will give HMRC better oversight of employer compliance in this area.

Such benefits (cars, fuel, and vans) are the obvious places to start as they are already subject to specific reporting and calculation requirements for tax purposes, while medical benefits tend to be consistent and straightforward, ICAEW said. Niche benefits may be harder to capture and value in real-time as HMRC continues to fine tune technical specifications and reporting requirements.

Employers should note that mandatory payrolling is not just mandation of the voluntary scheme, which has been available since April 2016. There will be other requirements to consider, including calculating and paying Class 1A in real time, adjusting values in year for real-time accuracy and additional data collection. HMRC will also now be considering introducing voluntary Class 1A real-time reporting for non-mandated benefits.

Employers should also consider any further HMRC guidance on changes to current processes and information flows to meet their obligations.

ENDS