Payrolling benefits in kind: preparing for April 2027

If you outsource payroll, the useful question is simple: who is getting your business ready, and what will they need from you? A clear answer now gives you time to sort out the handover between your benefits provider, finance team and payroll supplier.

What changes in April 2027?

HMRC’s published timetable brings mandatory payrolling of taxable benefits for company cars, car fuel, vans, van fuel and employer-provided medical cover into phase one from 6 April 2027. Income Tax and Class 1A National Insurance on those benefits will be reported in real time through payroll. Most other benefits follow from April 2028; loans and accommodation are excluded from mandatory payrolling. See HMRC’s phased timetable.

This is a future change. HMRC’s guidance is interim, and the included legislation is still a draft awaiting presentation to Parliament; final details may change. Check HMRC’s current guidance status.

The phased approach was announced in June. Its 23 September update added fuel type to the draft car-reporting fields, rather than changing the start date. Keep your preparation tied to the latest guidance as the technical detail develops. See HMRC’s update record.

Four questions for your payroll provider

We suggest asking for a short written plan covering these points:

1. Which of our benefits are affected? Give the provider your current benefits list, including benefits normally reported on a P11D, and ask them to identify what falls into phase one. Include benefits for directors as well as other employees where applicable.
2. Who supplies the information, and when? Agree who tells payroll when cover starts, a vehicle changes or someone leaves. For weekly payroll, make the cut-off clear.
3. When can we test the process? Ask when the software will be ready and how the provider will check a normal run, a new starter and a mid-year change.
4. What is included in our fee? Confirm the setup work, regular processing, corrections and employee support. Ask for any extra charges in writing before agreeing to them.

These are practical review questions, not a list of new legal requirements. HMRC’s preparation guidance also asks employers to review benefit information flows, software and changes during the year. Read the preparation guidance.

How could employees’ payslips change?

Employees may need a plain-English explanation of how the change affects their payslip. HMRC flags that some people could be paying tax on current benefits while also settling an underpayment from a previous year. That is a timing overlap, rather than the same benefit being taxed twice. Read HMRC’s employer update.

Ask who will prepare the message and answer questions. If your arrangement is meant to remove payroll admin from your team, the support around the change deserves as much attention as the software.

What about employer cash flow?

HMRC also flags a potential first-year overlap for employers: Class 1A National Insurance for 2026–27 benefits under the existing system can fall due while real-time payments for 2027–28 have begun. Ask your accountant or payroll provider to assess the timing for your business. See HMRC’s cash-flow preparation points.

You don’t need to change provider simply because the reporting rules are changing. You do need to know what your current service covers. If the answers are vague, use the conversation to review the price, workload and support together.

General information, not legal or tax advice. This reflects HMRC’s published position on 4 October 2026. Check the final requirements and your circumstances with your professional advisers.