article / 9th Oct 2026

Mandatory payrolling of Benefits in Kind: 2027 Guide

The government has announced a phased introduction of mandatory payrolling of Benefits in Kind (BiKs), giving employers additional time to prepare for one of the most significant payroll reporting changes in recent years.

From April 2027, many benefits that are currently reported annually through P11D forms will instead need to be processed through payroll in real time. While the move is intended to simplify tax reporting and improve accuracy, it will require businesses to review their payroll systems, processes, and reporting arrangements well in advance.

For some organisations, this may simply involve updating existing processes. For others, it could be the catalyst for reviewing their payroll software, implementing a new payroll solution, or exploring outsourced payroll support.

mandatory payrolling of Benefits in Kind

What is changing?

Currently, employers report most taxable benefits and expenses to HMRC after the end of the tax year using P11D forms. Employers then pay any tax due through adjustments to their tax code.

Under the new rules, tax on many Benefits in Kind will be collected through PAYE as the benefit is provided. This means taxable benefits will be reported through payroll throughout the year, creating a more real-time approach to tax collection.

The aim is to reduce the reliance on P11D reporting and minimise the need for tax code adjustments, creating a simpler experience for both employers and employees.

A phased introduction

Following consultation with employers, payroll professionals, and software providers, HMRC has confirmed a phased rollout.

From April 2027, mandatory payrolling will apply to:

Company cars
Car fuel benefits
Vans and van fuel
Private medical insurance and healthcare benefits

Most remaining Benefit in Kind are expected to follow from April 2028, while employment-related loans and living accommodation will remain outside the mandatory system for the time being.

The phased approach gives businesses additional time to prepare, but employers should not underestimate the work that may be required behind the scenes.

Why does this matter for employers?

While the changes are designed to simplify reporting in the long term, they also place greater emphasis on having accurate payroll processes and systems in place throughout the year.

Many organisations will need to assess whether their current payroll software can support the new reporting requirements and whether existing processes for capturing benefit information are robust enough to meet HMRC’s expectations.

Unlike the current annual reporting process, benefit information will need to be captured and processed accurately throughout the tax year. This means HR, finance and payroll teams will need to work closely together to ensure employee benefits are recorded correctly and changes are communicated promptly.

Businesses relying on manual processes or outdated systems may need to review their current arrangements to reduce the risk of errors and ensure they are ready for the changes.
What do businesses need to do?

Businesses may need to:
- Review payroll software capabilities
- Assess how employee benefit information is collected and recorded
- Improve communication between HR, finance, and payroll teams
- Ensure benefit values can be calculated accurately throughout the year
- Update payroll processes and controls
- Communicate changes to employees
For organisations managing payroll internally, these changes may highlight gaps in existing processes or technology. For others, it may be an opportunity to review whether their current payroll arrangements remain fit for purpose.
What will employees notice?

For employees, the most visible change will be how tax on their benefits is collected.

Rather than tax being adjusted through their tax code after the end of the tax year, tax on Benefits in Kind will generally be collected through payroll as the benefit is received.

This means employees may notice changes to their payslips and take-home pay throughout the year. Clear communication from employers will help employees understand these changes and avoid unnecessary confusion.
Next steps for businesses

Although April 2027 may seem some way off, businesses should begin planning now to avoid unnecessary disruption closer to implementation.

A good starting point is to:
- Review all Benefits of Kind currently provided to employees
- Assess whether existing payroll systems can support mandatory payrolling
- Identify any gaps in data collection and reporting processes
- Ensure HR, payroll, and finance teams understand the upcoming requirements
- Consider whether a payroll system review or implementation project may be required
- Evaluate whether outsourced payroll support could reduce administrative burden and compliance risk
Taking proactive action now will give businesses more time to plan, budget, and implement any required changes before the new rules take effect.
An opportunity to review your payroll arrangements

While mandatory payrolling represents a compliance change, it also presents an opportunity for businesses to review the effectiveness of their wider payroll operations.

Many organisations continue to rely on manual processes, legacy systems, or payroll software that may not be equipped to support future reporting requirements efficiently. With payroll legislation continually evolving, having the right systems and expertise in place has never been more important.

For businesses considering a change, now may be the ideal time to assess whether existing payroll processes are delivering the accuracy, efficiency, and compliance support required for the years ahead.
Need support with your payroll?

From managing day-to-day payroll to preparing for legislative changes and implementation, we can help you find the right solution for your business.

Explore our payroll services

How Tugela People can help

At Tugela People, we support organisations with both outsourced payroll services and payroll implementation projects.

Whether you are looking for a trusted payroll partner to manage payroll on your behalf, reviewing your current payroll processes, or implementing a new payroll system to support changing compliance requirements, our team can help guide you through the process.

From payroll audits and system reviews through to implementation, migration, onboarding, and ongoing payroll management, we work closely with businesses to create payroll solutions that are accurate, efficient and compliant.

With mandatory payrolling of Benefits in Kind approaching, now is the perfect time to review your payroll arrangements and ensure your business is ready for the future.

Contact the team

Your Questions Answered

Everything you need to know about Mandatory Payrolling of Benefits in Kind

What is mandatory payrolling of Benefits in Kind?
Mandatory payrolling of Benefits in Kind (BiKs) is a new HMRC requirement that means employers must report certain taxable employee benefits through payroll instead of submitting annual P11D forms. Tax will be collected through PAYE during the tax year, creating a more real-time reporting process.
When does mandatory payrolling of Benefits in Kind start?
Mandatory payrolling will begin from April 2027 for selected Benefits in Kind, including company cars, car fuel, vans, van fuel, and private medical insurance. Most remaining taxable benefits are expected to become mandatory from April 2028.
Will employers still need to submit P11D forms?
For benefits that fall under mandatory payrolling, employers will generally no longer submit P11S forms. However, P11Ds may still be required for benefits that remain outside the mandatory payrolling rules until further changes are introduced.

Does my payroll software support mandatory payrolling?
Not all payroll systems will be ready for the new reporting requirements. Employers should speak with their software provider or payroll partner to confirm whether their current system supports mandatory payrolling and identify whether upgrades or a new payroll solution may be required.
Can outsourced payroll providers help with mandatory payrolling?
Yes. An experienced outsourced payroll provider can help businesses prepare for the new legislation by reviewing existing processes, ensuring payroll software is configured correctly, managing ongoing compliance, and reducing the administrative burden on internal teams.

Is your payroll ready for April 2027?

With mandatory payrolling of Benefits in Kind approaching, now is the time to review your payroll systems and processes. We work with hundreds of organisations, each with different systems and needs. Whether you need payroll support or are considering a new solution, we can help you find the right fit for your business.

Talk to us