From 6 April 2027, the payrolling of taxable benefits will become mandatory for most employers. HMRC has delayed the introduction from the originally proposed date of 6 April 2026, giving businesses additional time to prepare.

Under the new rules, taxable benefits will be processed through payroll in real time rather than reported annually on P11D forms after the end of the tax year.

What does this mean in practice?

Benefits such as private medical insurance and company cars will be taxed through employees’ monthly payroll. This means employees will pay tax on these benefits as they receive them, rather than through a later adjustment to their tax code.

For the 2027/28 tax year, employment-related loans and living accommodation will remain voluntary for payrolling purposes and can still be reported via P11Ds. However, as mandatory payrolling is expected to expand in future years, some employers may wish to start payrolling these benefits now to simplify administration going forward.

Why this matters for employers

Moving benefits into payroll can provide a more accurate and transparent method of collecting tax. It may also help reduce employee queries relating to tax code adjustments and unexpected underpayments.

That said, the transition will require careful planning.

One important point for employers with existing P11D benefits is that employees may initially notice higher tax deductions when benefits are first moved into payroll. This is because existing tax code adjustments relating to prior year benefits may still be in place while the benefit is also being taxed through payroll.

Clear employee communication will therefore be essential during the transition period to help avoid confusion and unnecessary concern.

Preparing ahead of the changes

Although the new rules will not become mandatory until April 2027, employers may wish to voluntarily payroll benefits during the 2026/27 tax year.

Taking action early can help businesses to:

• Review existing benefits and reporting processes 
• Update payroll systems and internal procedures 
• Identify any practical or administrative issues ahead of time 
• Communicate changes clearly to employees before the rules become compulsory 
• Reduce the risk of errors or employee confusion during the transition 

Employers should also note that only benefits registered with HMRC before 6 April 2026 can currently be payrolled.

How Sopher + Co can help

At Sopher + Co, we’re supporting clients with the transition to mandatory payrolling of benefits.

We can help you review your current benefits reporting, assess whether voluntary payrolling would be beneficial ahead of April 2027, and ensure your payroll processes and employee communications are ready for the changes.

If you would like to discuss how these changes may affect your business, please get in touch with our team.