HMRC Announces Phased Introduction of Mandatory Payrolling of Benefits in Kind

HMRC has confirmed that the introduction of mandatory payrolling of Benefits in Kind (BiKs) will now be phased over two years, giving employers, payroll providers and software developers additional time to prepare. The announcement follows feedback from employers and the payroll industry and revises the original implementation timetable.

The New Timetable

Phase 1 – From 6 April 2027

Mandatory payrolling will apply to:

1. Company cars

2. Car fuel benefits

3. Vans

4. Van fuel benefits

5. Employer-provided medical benefits

   
   

These are among the most commonly provided benefits and are generally considered easier to administer through payroll systems.

Phase 2 – From April 2028

Most other taxable Benefits in Kind will become subject to mandatory payrolling from April 2028.

Benefits Remaining Outside the Mandatory Regime

Employment-related loans and living accommodation benefits will remain outside the mandatory regime and can continue to be payrolled voluntarily if employers choose to do so.

What Employers Should Do

Although the revised timetable provides additional time to prepare, employers should use this opportunity to review their payroll processes, benefit reporting and software to ensure they are ready for the new requirements.

Businesses that currently manage payroll in-house may also wish to consider whether their existing systems and resources will be sufficient to meet the additional reporting obligations.

If you have any questions about the changes, or are considering whether outsourcing your payroll could help reduce the administrative burden, our experienced in-house payroll team is on hand to provide practical advice and support to help you prepare for the transition.

Further Reading

For full details of the phased implementation and HMRC’s guidance, visit:

Mandatory payrolling of benefits in kind and expenses – interim guidance and legislation - Guidance - GOV.UK