With the 6 July P11D filing deadline now behind us, many employers will be breathing a sigh of relief. However, while the annual reporting season may be over for another year, now is the ideal time to focus on the significant changes coming to the way Benefits in Kind (BiKs) are reported and taxed.
P11D season has ended, but preparations for change should begin
Employers that provided taxable benefits during the 2025/26 tax year and did not payroll them were required to submit their P11D forms and P11D(b) declaration to HMRC by 6 July 2026. Common benefits requiring reporting included company cars, private medical insurance, beneficial loans, accommodation, and other employee perks.
While the deadline has now passed, it represents the beginning of the end for traditional P11D reporting as we know it.
Mandatory payrolling of benefits is on the horizon
HMRC is moving ahead with plans to make the payrolling of Benefits in Kind mandatory, fundamentally changing how employers report and administer employee benefits. Following industry consultation and feedback, the introduction has been delayed from its original target date and will now begin from April 2027 using a phased approach.
Payrolling benefits means the taxable value of benefits is processed through payroll throughout the year, rather than being reported after the tax year has ended using P11D forms. Tax is collected in real time through PAYE, giving employees greater visibility of the tax they pay and reducing year-end administration for employers.
What will change from April 2027?
Under HMRC’s phased implementation plan, the first benefits to fall under mandatory payrolling from April 2027 will include:
- Company cars and car fuel
- Vans and van fuel
- Private medical benefits
Other Benefits in Kind will continue to be reported through P11Ds initially, before being brought within the mandatory payrolling regime in later phases. More complex benefits, such as beneficial loans and accommodation benefits, are expected to transition at a later date.
Why employers should start preparing now
Although mandatory implementation may still seem some way off, the changes will require employers to review payroll processes, benefit arrangements and software capabilities well in advance.
For many businesses, preparation is likely to involve:
- Reviewing current benefits and how they are reported
- Ensuring payroll software can accommodate payrolled benefits
- Updating internal processes and controls
- Communicating future changes to employees
- Providing additional payroll training where required
Organisations that take steps now will be far better positioned to manage a smooth transition when the new rules take effect.
The future of benefits reporting
The move to mandatory payrolling forms part of HMRC’s wider objective to modernise and simplify the tax system. By bringing the taxation of Benefits in Kind into real-time payroll reporting, the process should become more transparent for employees and less administratively burdensome for employers in the long term.
While the latest P11D deadline may have passed, employers should use this opportunity to look ahead. Understanding the upcoming changes now will help avoid last-minute disruption and ensure your payroll function is ready for the new era of Benefits in Kind reporting.
If you would like support reviewing your current arrangements or preparing for mandatory payrolling, our payroll team is here to help.
Get in touch
If you would like to discuss how these changes may affect your business, or need support preparing your payroll systems and reporting processes, our payroll team is here to help. Get in touch by clicking the button below.
