Major changes to reporting requirements
Mandatory payrolling of Benefits in Kind (BiKs) and taxable employment expenses will begin on 6 April 2027. This shift marks a significant change for employers, as the long‑standing P11D process will no longer apply to most benefits from the 2027–28 tax year. Consequently, organisations must prepare for a new system that delivers real‑time reporting through payroll.
Timetable and preparation period
The requirement to report Income Tax and Class 1A National Insurance through Real Time Information (RTI) was initially planned for April 2026. However, the government delayed the start date to 6 April 2027. This extension gives employers, payroll teams and software providers more time to adjust. It also allows agents to update their processes and communications. Meanwhile, the current voluntary payrolling service remains open. The deadline to register for voluntary payrolling for the 2026–27 tax year is 5 April 2026. After that date, the service will close as HMRC prepares for the transition to the mandatory scheme.
What will change in 2027: Benefits in Kind
From April 2027, employers will report Benefits in Kind and taxable expenses through the Full Payment Submission (FPS). This aligns the treatment of BiKs with salary reporting. HMRC will expand RTI fields so they can capture the data currently provided on P11D and P11D(b) forms. Employers may also choose to payroll employment‑related loans and accommodation on a voluntary basis. This optional approach allows flexibility while still supporting consistent reporting.
HMRC support and penalty position
To ease the transition, HMRC will waive penalties for inaccuracies relating to mandatory payrolling in 2027–28. However, this leniency applies only where there is no evidence of deliberate non‑compliance. All existing penalties for late filing, late payment and interest charges will continue to apply. Employers should therefore maintain accurate records and ensure systems are updated well before April 2027.
Software updates and practical steps
HMRC has confirmed that Basic PAYE Tools will be updated to support payrolling from April 2027. Employers should review their payroll software, speak with providers and train staff in advance. Early planning reduces compliance risks and ensures a smoother transition to the new system.
