HM Revenue and Customs have announced and confirmed that the planned implementation of mandatory Payrolling that was originally announced as due to be implemented from 6th April 2026 has been delayed until 6th April 2027.
So what has been announced?
The government has announced additional time to prepare for the introduction of mandatory payrolling for benefits in kind (BiKs) and taxable employment expenses.
This … confirms that mandatory payrolling will be introduced from April 2027 rather than April 2026, after feedback from external stakeholders.
This will provide more time for software providers, employers, tax agents and other stakeholders to prepare for the change.
The technical note provides more operational information on mandatory payrolling so that businesses can adapt to these changes in time for April 2027.
The additional time will mean that for most BiKs and expenses, Income Tax and Class 1A National Insurance contributions (NICs) will need to be reported through Real Time Information (RTI) and paid in real time from April 2027.
Employers will also be able to payroll employment-related loans and accommodation on a voluntary basis from April 2027. There are some less common cases, such as tax award schemes and third-party benefits, which are not covered…
Reporting requirements
From April 2027, the reporting process for BiKs and expenses will be through the Full Payment Submission (FPS). This is the same process employers currently use to report salary and other employee details to HMRC when payments are made to employees.
The FPS will be used to report the taxable value of BiKs and expenses so that both Income Tax and Class 1A NICs can be reported in real-time.
The number of fields for reporting BiKs and taxable employment expenses in RTI (via an FPS) will be increased to align with what is currently reported in the P11D and P11D(b) forms.
Under the present voluntary payrolling arrangements, limited data is collected on BiKs. To support the introduction of mandatory payrolling, HMRC will need visibility of the BiKs in the FPS to ensure that the correct tax is being reported and paid.
Registration
Employers will not need to register in order to payroll benefits in kind from April 2027, with the exception of loans and accommodation benefits. HMRC will automatically remove benefits out of employees’ tax codes in readiness for payrolling from April 2027.
The 50% Overriding Regulatory Limit
Employers must not deduct more than 50% in tax from an employee’s pay.
Any uncollected amounts in excess of the 50% limit will be collected by HMRC after the end of the tax year via the existing end-of-year reconciliation (P800) process or Simple Assessment.
Retaining the P11D and P11D(b) for some cases
For a temporary period, HMRC will retain the P11D and P11D(b) for employment related loans and accommodation. Voluntary payrolling of these benefits will be available from April 2027. A timeline for mandatory payrolling of these BiKs will be set out in due course.
HMRC are also considering retaining the P11D and P11D(b) processes for specific scenarios, for example, globally mobile employees that are part of modified PAYEarrangements, commonly referred to as EP Appendix 6 and Appendix 7A. Under these agreements employers have until 31 January to submit a final report of the BiKs they have provided to their employees. We will also be considering the time period which employers should have for doing so following the end of the tax year, depending on the scenario.
More detail will follow on how Payrolling will operate from April 2027.
PAYadvice.UK 28/4/2025