HMRC has announced a one-year delay to the mandatory payrolling of most taxable benefits. Employers can now continue using form P11D until 6 April 2027, giving them more time to prepare for the transition.
If you are concerned about understanding the changes, we have a friendly team on hand to help you establish smooth and reliable payroll services. You can book a free consultation with our team to discuss your needs today.
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What’s changing in payrolling benefits?
From the 2027/28 tax year, the rules of employee benefits and payroll are changing. Most employee benefits must be reported through payroll software. The only exceptions will be employer-provided accommodation and interest-free or low-interest loans. These implications for employee benefits and payroll can still be reported via form P11D, although HMRC plans to bring them into the payrolling system in the future.
What does this mean for 2026/27?
For the 2026/27 tax year, payrolling benefits now remain optional for the time being. Employers who wish to offer payroll benefits must register with HMRC before 6 April 2026.
Accommodation and beneficial loans cannot be payrolled during this period and must continue to be reported using a P11D.
From April 2027 onwards
- Mandatory payrolling of benefits begins with no registration required for most benefits.
- Optional registration continues for accommodation and beneficial loans if employers want to pay these benefits.
- P11Ds will still apply for accommodation and loan benefits that are not payrolled.
- An end-of-year adjustment process will be available where the full value of a benefit cannot be calculated in real time.
HMRC will remove relevant benefits from employees’ tax codes from 6 April 2027 to support this change.
Impact on employees
With payroll, tax is deducted in real time. However, employees could see additional deductions in their payroll if HMRC needs to collect tax for benefits received in previous tax years.
If this causes financial strain, employees can ask HMRC to spread the underpayment over more than one year.
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HMRC has released a technical note outlining the full details of the changes.
If you want to learn more about the mandatory payroll deadlines for 2026, read our Payroll deadlines UK: what every employer needs to know for 2025/26. Elite Payroll Services is on a mission to take the stress out of payroll, helping businesses stay informed, run smoothly and avoid charges and penalties to save you money.
At Elite Payroll Services, we help businesses stay compliant and up to date with the latest payroll legislation. If you’re unsure how this affects your organisation or need support implementing payrolling, get in touch with our team on 01423 727334 or email [email protected].
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