For decades, most UK employers have reported benefits in kind after the tax year on form P11D, and paid Class 1A National Insurance once a year. That is changing. HMRC is moving to mandatory payrolling, where the taxable value of benefits is processed through payroll each pay period, and it's doing so in phases.
The timeline
| Date | What changes |
|---|---|
| Tax year 2026/27 | No change yet. Class 1A on benefits you voluntarily payroll is still reported on the P11D(b), due by 6 July 2027. |
| 6 April 2027 (phase 1) | Mandatory payrolling of company cars, car fuel, vans, van fuel and employer-provided medical benefits, with Class 1A National Insurance reported in real time through payroll. |
| 6 April 2027 | If you choose to payroll any other benefits, you must also payroll the Class 1A on them in real time. You can't payroll the tax and report Class 1A at year end. |
| 6 April 2028 (phase 2) | Most other benefits in kind move into mandatory payrolling. |
| No date set | Employment-related loans and living accommodation are excluded from mandatory payrolling, though they can be payrolled voluntarily. |
HMRC has also confirmed that employers can choose to exclude globally mobile employees from mandatory payrolling and keep using P11D reporting for them. More detailed technical guidance is expected in autumn 2026, so check for updates.
Why it matters for startups and scale-ups
Private medical insurance is one of the most common startup perks, and it falls into phase 1. If you offer it, you'll need to process it through payroll from April 2027. Employees will see the change too. Tax on the benefit is collected through each payslip, rather than through an adjustment to their tax code, so take-home pay may move and people will ask why.
How to prepare
- List every benefit you provide, including perks paid by expense claim or company card, and sort them into phase 1, phase 2 and excluded.
- Get the data flowing. You'll need cash equivalent values each pay period. Ask your insurer, fleet provider and benefits platform how and when they'll provide them.
- Check your payroll software. Confirm it can payroll benefits and calculate and report Class 1A in real time, and ask for the provider's timetable.
- Decide on voluntary payrolling. If you already payroll other benefits voluntarily, plan for Class 1A moving into payroll for those too.
- Plan cash flow. Class 1A will be paid with each month's PAYE rather than in one annual payment.
- Tell employees early. A short note before April 2027 explaining the change will save a lot of payslip queries.
- Close 2026/27 properly. P11Ds and the P11D(b) are still needed for the current year, due by 6 July 2027.
Frequently asked questions
Which benefits must be payrolled from April 2027?
Company cars, car fuel, vans, van fuel and employer-provided medical benefits are in phase 1 from 6 April 2027. Most other benefits follow from 6 April 2028.
Are P11Ds being abolished?
They're being phased out for benefits that move into mandatory payrolling. Loans and living accommodation are excluded from mandatory payrolling, and P11Ds are still required for the 2026/27 tax year.
This guide is general information, not tax or legal advice. Rules and thresholds change, so check the latest HMRC and Pensions Regulator guidance, or talk to us about your situation.