Mandatory Real-Time Reporting of Benefits in Kind Delayed Until April 2027

HMRC delays mandatory payrolling of most employee benefits by one year

HM Revenue & Customs (HMRC) has confirmed a 12-month delay in the implementation of mandatory real-time reporting for most benefits in kind (BiKs). Initially expected to come into force in April 2026, the requirement will now apply from April 2027.

This extension follows feedback from employers, payroll providers, and professional bodies, who requested additional time to update systems, train staff, and prepare for what represents a significant administrative shift in how benefits are reported and taxed.

What’s Changing?

From April 2027, employers will be required to report and pay Income Tax and Class 1A National Insurance Contributions (NICs) on most benefits in kind through payroll software, in real time. This replaces the current end-of-year P11D process for these benefits.

Notably, employment-related loans and accommodation will not be included in the initial rollout of mandatory payrolling. However, HMRC has indicated that these benefits can still be voluntarily payrolled from April 2027 if employers wish.

Why Is This Happening?

The move is part of HMRC’s broader strategy to modernise and digitise the tax system. Payrolling benefits aims to ensure employees pay the right amount of tax at the right time, reducing the need for adjustments and corrections at the end of the tax year.

It is also expected to streamline processes for employers, eliminating the need to file around 4 million P11D returns annually.

What Employers Should Do Now

Although the change is still two years away, HMRC encourages employers to begin preparing early:

• Review Payroll Capabilities: Assess whether existing software and systems can support the payrolling of benefits in real time.
• Train Internal Teams: Ensure payroll, HR, and finance staff are familiar with the new requirements and processes.
• Improve Data Accuracy: Maintain accurate and timely records for all employee benefits to support efficient reporting.
• Consider Voluntary Payrolling: Employers not already payrolling benefits may wish to adopt the process voluntarily ahead of 2027, to ease the eventual transition.

Final Thoughts

While the deferral offers a welcome extension, the change is inevitable. Employers would be well-advised to treat the delay as a planning window, not a reason to defer action. Early preparation will help minimise disruption and ensure compliance when the new rules take effect in April 2027.

HMRCs technical note on this issue can be found here

For more information, please contact us at: consultancy@vantagefeeprotect.com