Under the phased approach: 

• company car, van, fuel and medical benefits will be payrolled from 6 April 2027; and
• all other benefits, excluding loans and accommodation, will be payrolled from 6 April 2028.  

The payrolling of loans and accommodation will remain voluntary until further notice as they can be difficult to value within the tax year.  

What is mandatory payrolling of BIK? 

Currently, most employers report BIK for a tax year to HMRC on form P11D (per employee) and form P11D(b) (per employer). This is done after the end of the tax year, with any class 1A (employer) national insurance contributions (NIC) due paid around the same time.  

HMRC will then amend the employee’s tax code so that any income tax due is collected from the employee’s pay going forward. Depending on the circumstances, HMRC also may seek to collect the tax by issuing a P800 or a simple assessment, or the tax may be paid through self assessment. 

It is currently possible for the employer to payroll some BIK voluntarily. In this case, income tax is collected during the tax year from the employee’s pay by way of an adjustment to their tax code. The employer must keep a record of the benefits provided and report and pay any class 1A NIC due via the P11D(b), after the end of the tax year, although a P11D is not required for any benefits that are payrolled. 

The government intends to make payrolling of most BIK mandatory. Both income tax and NIC will be collected via pay as you earn (PAYE) real time information (RTI). Employers will not be required to complete forms P11D where the benefits provided are within scope of mandatory payrolling of BIK as the reporting and payment of the tax and NIC due will be done on a real time basis.  Further guidance from HMRC on how class 1A NIC will be calculated and reported in real time is expected in the near future, including consideration of the option to pay real time class 1A on non mandated benefits. 

ICAEW’s view 

ICAEW’s Tax Faculty has welcomed the government’s announcement, having previously raised concerns about the timetable for implementation, which ICAEW believed did not leave software developers, employers and agents enough time to prepare.   The revised approach also significantly reduces the number of data fields that will be required under RTI making the new process simpler for both developers and employers to implement.

Policy development 

• January 2024: The then government announces that it will mandate the reporting and paying of income tax and class 1A NIC on BIK via the payroll from April 2026. ICAEW warns that “a start date of April 2026 does not leave much time for HMRC to draft a full specification for software development and testing before implementation”. 
• October 2024: The current government confirms that it will continue with plans for the mandatory payrolling of BIK from April 2026. However, some changes to the previous government’s plans are announced, including delaying the introduction of mandatory payrolling for employment-related loans and accommodation. This follows engagement with stakeholders, including ICAEW.  
• April 2025: The government announces that the start date for mandatory payrolling of benefits will be delayed by one year, from April 2026 to April 2027. This follows a period of informal consultation with stakeholders during which ICAEW set out its concerns with the policy in a letter to HMRC.  
• November 2025: HMRC shares interim guidance and technical specifications and RTI data fields with payroll software providers. 
• June 2026: The government announces a phased approach to mandatory payrolling of BIK.  Some benefits will be payrolled from April 2027 (phase one), with all other benefits to follow from April 2028 (phase two), except for loans and accommodation which remain voluntary. The data field requirements are significantly reduced.  The move is welcomed by ICAEW.  
• July 2026: Updated interim guidance for employers, payroll professionals, software developers and tax agents due to be published. 
• Autumn 2026: Revised technical specifications for phased mandation and confirmed RTI data fields for phase 1 due to be issued. 
• April 2027: Under the current plans, company car, van, fuel and medical benefits will become subject to mandatory payrolling from 6 April 2027.  
• April 2028: It is expected that all other benefits, except for loans and accommodation, which remain voluntary, will become subject to mandatory payrolling from 6 April 2028.