Are you ready for payrolling benefits in kind?

Payrolling of benefits in kind - what it means for employers and employees.

HMRC is changing the way tax on workplace benefits is collected. Whether you run a business, are a director of your own company, or receive benefits through your job, here’s a quick guide to what’s happening.

What’s changing? 

At the moment, if an employer provides benefits such as a company car or private medical insurance, the tax is dealt with once a year, after the tax year ends, using a form called a P11D. From April 2027, HMRC will require this to be handled through payroll every month instead. Until then, everything carries on as normal.

To begin with, the change applies to:

• company cars, and any fuel the employer pays for

• company vans, and any fuel the employer pays for

• private medical and dental cover

Other benefits, such as gym memberships, accommodation and mobile phones, are expected to follow in April 2028.

What does payrolling benefits in kind mean if you’re an employer?

You’ll still need to complete P11Ds in the usual way up to an including 2026/27. From April 2027, the value of the benefits above will need to be included in your monthly payroll, and employer National Insurance on them will be paid monthly rather than once a year.

That means your payroll software, or whoever runs your payroll, will need to be ready. It’s worth checking now that they’re aware of the change and have the details of every benefit you provide, so everything is in place well before April 2027.

If you’d like help getting ready, or would like us to look after your payroll for you, we’d be happy to talk it through.

What does payrolling benefits in kind mean if you receive benefits from your employer?

From April 2027, your payslip will show the value of your benefits each month, and the tax will be taken as you go. HMRC will automatically remove benefits in kind from your tax code as part of the switch.

For most people, the total tax won’t change. It’s simply collected differently. You may notice a different figure on your payslip, so it’s worth keeping an eye on your first few payslips after April 2027 and asking your employer if anything looks unexpected.

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