HMRC delays full rollout of payrolling for benefits in kind

HMRC has confirmed mandatory real-time reporting of income tax and Class 1A National Insurance contributions (NICs) for certain benefits in kind (BiKs) and taxable expenses will now be phased in from 6 April 2027, rather than rolled out in a single start date as originally planned.

Essentially phase one will only cover motoring expenses and medical benefits. HMRC has removed 94 categories from the initial rollout, signalling a major watering down of the original blanket plan affecting nearly all benefits in kind.

With payrolling, the taxable value of BiKs and expenses have to be reported via the full payment submission (FPS).

HMRC said the decision to delay ‘will support a smoother transition for businesses’. But it has created more uncertainty for companies with changing requirements for payroll reporting when they were planning for the rule change from the new tax year.

This is not the first time HMRC has delayed the expenses payroll reporting, with the original timetable of rollout from April 2026 already put on hold in 2025. The last delay followed lobbying from professional bodies, accountants and the payroll community, which all said the new rules were being rushed in and did not give companies enough time to prepare.

Under the new timetable HMRC confirmed phase 1 of the rollout will commence from 6 April 2027 for simpler benefits in kind, followed by a second phase starting in April 2028.

From 6 April 2027, mandatory payrolling of BiKs will be phased in as part of phase 1 for:

• company cars
• car fuel
• vans
• van fuel
• employer-provided medical benefits 

HMRC will provide draft data item guidance in the coming weeks ‘reflecting the removal of 94 real time information (RTI) data fields for BiKs’.

Phase 2 will see the mandatory payrolling of most other BiKs from 6 April 2028, but  loans and accommodation will remain voluntary, HMRC confirmed.

Technical guidance will be updated by July, with final guidance on phase 1 rules published at the Budget this autumn.  

The decision to make yet another delay has been criticised by tax experts.

Caroline Harwood, head of employment tax at BDO, said: ‘This is just the latest example of HMRC’s inability to effectively deliver a major change programme on time.

‘This half-way house solution won’t help anyone. It will put extra pressure on employers who will now have to contend with two systems rather than one. It will also lead to confusion among taxpayers as to why their payslip has changed for some but not necessarily all benefits, what their tax code means, and what to expect during and at the end of the tax year.

‘There is a strong argument to say that the whole scheme should be postponed until such time as HMRC is ready to implement the payrolling of all benefits in kind at the same time.’

But the Association of Taxation Technicians (ATT) welcomed the decision, saying it was the result of ‘dialogue with the ATT, other professional bodies and the software industry’, reflecting the scale of concern about HMRC’s timetable.

‘We welcome the phased approach, as well as the reduced initial data field requirement for RTI submissions, which should ease the burden for employers in changing their systems compared with payrolling all benefits from April 2027,’ the ATT said.

However, employers should note that other benefits will have to continue to be reported on forms P11D for the foreseeable future.

Companies already using benefits in kind payrolling will be able to continue using the real time system, as remember some businesses signed up early to the pilot.

‘HMRC has confirmed that anyone who has already planned to payroll all their benefits can still do so, with only company cars, vans, and private medical data to be entered into the specific FPS data fields. Additional benefits processed will be reported through the voluntary method and registration will likely still be required,’ according to the Chartered Institute of Payroll Professionals (CIPP).  

The decision to delay appears to have followed intense discussions with HMRC and key stakeholders including professional bodies and software developers.

Roxanne Slevin, policy and research officer at the CIPP, said: ‘This collaborative approach is designed to support a smooth transition. We hope this will not only aid with software development, allowing more time to build and test the required data fields to accurately report these benefits, but gives valuable time for guidance to be updated and absorbed by employers, payroll providers, and agents.

‘This will allow them to prepare and adapt by refining relevant processes, train their staff and help support businesses remain compliant through these big changes.’

Comprehensive guidance will be needed from HMRC to clarify all the implications of the latest announcement and how the old and new systems will work in tandem without causing confusion to employers.

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