HMRC Delay Mandatory Payrolling of Benefits until April 2027

Summary

In an announcement that many in the industry expected, HMRC have delayed the mandatory payrolling of benefits until April 2027.

The government announced the additional time to prepare for the introduction of mandatory payrolling for benefits in kind (BiKs) and taxable employment expenses on the 28th of April 2025.

They also published a technical note that confirms some of the details which were still missing from the initial announcement. This delay will provide more time for software providers, employers, tax agents and other stakeholders to prepare for the change. 

Although the technical note provides more operational information on mandatory payrolling so that businesses can adapt to these changes in time for April 2027, it is worth noting that these are still subject to change, with HMRC saying that “it will continue to engage closely with stakeholders, using the valuable feedback we receive to inform the outstanding design decisions and deliver this change as smoothly as possible”.

More Granular Reporting

One of the key announcements is the requirement to report far more granular detail than is currently available via RTI/FPS. Under the present voluntary payrolling arrangements, only limited data is collected and reported on benefits in kind, but HMRC require greater visibility of the benefits sent in the FPS to ensure that the correct tax is being reported and paid.

This means the number of fields for reporting benefits 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.

This change re-enforces the need for businesses to maintain detailed and auditable records of all their benefits, including the data used to make the necessary cash equivalent calculations.

Registration

Unlike the current situation, employers will not need to register to payroll benefits in kind from April 2027 (apart from loans and accommodation benefits). HMRC will automatically remove benefits out of employees’ tax codes in readiness for payrolling from April 2027.

However, if employers still want to move ahead with payrolling from April 2026, they can, but still need to register before that date.