The HM Revenue and Customs (HMRC) have confirmed a phased approach to the implementation of Payrolling for April 2027 and a further phase in April 2028.
Originally it had been proposed to mandate the payrolling of all benefits in kind excepting accommodation and loans, from April 2026. This was then delayed until April 2027. This announcement takes into account the complexities of the original draft documents and the momentous change that would be required across all employers of all sizes.
Also proposed was the requirement for payrolled benefits Class 1A liability to no longer be reported on form P11Db and paid over by 22nd July after the close of tax year, to a new and separate benefits Class 1A liability in real time from April 2027.
Voluntary Payrolling was originally introduced on the recommendation of the Office for Tax Simplification from April 2016 (our very own Simon Parsons was part of the OTS committee). Over the past ten years the number of employers taking advantage of Payrolling has steadily increased. It brings efficiencies for employers and HMRC and avoids the latent P11D double tax shock.
HMRC issued draft specification for Payrolling in 2025, however, the specification did not reflect the mandation of the prior voluntary programme, but attempted a lift and drop of the former P11D, a copy of the very form that was being removed, but with an obligation to report each and every pay period, a phenomenal task.
The over 140 new reporting fields for all sorts of obscure benefit types made the task for payroll software development vast, and equally the processing task for employers and their payroll operations, large and complex.
The software and service community have been persistent in warning HMRC of failure for the April 2027 commencement unless many of the fields were dropped, the process simplified, and the data aligned to application of the benefit amount to calculate tax and NICs.
On Friday 12th June 2026, a phased approach was announced with more simplified data requirements for April 2027. This was then confirmed in Monday 15th June 2026.
The benefits that fall into mandatory Payrolling from April 2027 are:
- Company cars
- Private fuel for company cars
- Medical related benefits
- Company Vans
- Private fuel for company vans
These benefits will require an element of separate and added data on the employers Full Payment Submission each pay period. A Class 1A liability will apply to these benefits.
Other benefit types may continue to be reported on form P11D, or be voluntarily payrolled with no requirement for P11D. A voluntary Class 1A calculation can be applied to these benefits as a combined total of both mandatory and voluntary benefits.
HMRC and representatives of the payroll service industry will aid development on a simplified basis for the next phase of mandation from April 2028.
The HMRC Software Development Support also issued the following on Monday 15th June 2026
Dear Developer,
We are alerting you to important changes to the scope and timelines for Mandatory Payrolling of Benefits in Kind (MPBiKs), which will now be delivered in phases. The changes update the draft information we provided in the technical specification in November 2025
Mandating Payrolling of Benefits in Kind (MPBiKs)
Following engagement by our Strategy and Policy colleagues with employers, payroll software developers and representative bodies, mandatory payrolling of BiKs is being phased in as follows:
- from April 2027, phase 1 mandates payrolling of company cars, car fuel, vans, van fuel and private medical benefits
- from April 2028, phase 2 mandates payrolling for most other BiKs (excluding loans and accommodation).
Phasing delivery in this way will support software developers, employers, payroll providers and agents to prepare and adapt in a manageable way.
The MPBiKs technical specifications previously shared in November 2025 were produced on the basis of full mandation from April 2027.
We are removing 94 RTI data fields for the benefits in kind from the current technical specification. We will provide draft data item guidance in the coming weeks. Once shared we encourage developers to review this information and begin work on any changes required to support Phase 1 PBiKs delivery for cars, car fuel, vans, van fuel and medical benefits in April 2027.
Next steps
Updated MPBiKs technical specifications for phased mandation and confirmed RTI data fields for Phase 1 will be issued after the RIM artefacts have been finalised. We expect to share these in autumn 2026 and will contact you again when they are available.
Updated interim guidance for employers, payroll professionals, software providers and tax agents will also be published on GOV.UK in July 2026.
We accept that some developers may have already started work on the previously distributed RIM artefacts. We have taken this phased approach in consultation with industry representatives as we believe it is the way forward to meet wider stakeholders’ needs.
We welcome technical feedback on any impact these changes have on your development. If you have any questions or require further clarification, please contact the Software Developer Support Team using the support link on the HMRC Developer Hub.
Kind regards,
HMRC SDSTeam
PAYadvice.UK 15/6/2026