Mandatory payrolling of Benefits in Kind (BiKs) will begin on 6 April 2027, introduced in phases to give employers and payroll providers time to adapt.
Under the first phase (covering the 2027/28 tax year), mandatory payrolling will apply to:
Company cars
Company car fuel
Vans
Van fuel
Private medical benefits
These benefits will need to be reported in real time through your payroll system rather than submitted after the end of the tax year via Form P11D.
Roadmap to Full Implementation
November 2026: Employers can voluntarily register to payroll other benefits not included in Phase 1 (such as beneficial loans and living accommodation).
April 2027: Mandatory real-time reporting begins for company vehicles, fuel, and private medical insurance.
April 2028: Mandatory payrolling extends to most other remaining benefits and expenses.
Impact on Employees
This change affects both employers and employees. Employees who currently pay tax on benefits through tax code adjustments will instead pay tax in real time via PAYE.
Because some employees may also be paying tax on BiKs from earlier years simultaneously, real-time reporting could temporarily impact their net take-home pay. We strongly advise employers to establish a clear communication plan well in advance to prevent confusion.
How Leftley Rowe Can Help
Navigating changes to payroll compliance requires early preparation. Whether you need assistance reviewing your payroll software, managing employee tax adjustments, or outsourcing your payroll operations, our payroll specialists are here to guide you.
Contact Leftley Rowe today to discuss how we can assist with your transition to mandatory payrolling.