10 Jul 2026

One year countdown to P11D: The move to payrolling benefits

As the P11D deadline looms, employers and employees need to be aware of what the changes mean for their payslips.

With less than a year to the 5 April 2027 P11D deadline, organisations need to prepare for the changes to reporting, which requires all employers to payroll benefits in kind. However, on 15 June 2026, HMRC announced a phased implementation of payrolling.

As a result, from April 2027 employers will only be required to payroll benefits in kind for the following benefits:

Company cars and car fuel
Company vans and van fuel
Employer-provided medical benefits.

The payrolling of other benefits will be phased in from April 2028.

The new regulations aim to create a standardised and more efficient way of managing the reporting of benefits by streamlining the reports, ensuring timely tax collection and reducing the opportunity for errors for both employers and employees.

However, organisations that haven’t started preparing for the changes could risk facing additional costs and increased workloads when they take effect. With reporting to be handled in real-time, employers may also face penalties if they submit information late to HMRC.

What the changes mean

From April 2027, taxing benefits through payroll will become mandatory, which means employers that currently report their benefits on P11D forms need to amend their payroll systems and processes. Benefits will be shifted to real-time reporting, which aims to simplify the current manual process and reduce delays.

For businesses running salary sacrifice car schemes, the benefit-in-kind can be payrolled, meaning tax is deducted from employees’ pay in real time rather than being collected later via the P11D process.
Employers need to ensure their payroll systems are integrated with other HR and financial systems, including HMRC, so that the opportunity for errors is minimised.

“The P11D changes under mandatory BIK payrolling should reduce issues such as mistakes or incomplete reporting, creating a much smoother experience for everyone,” said Cheryl Clements, head of business development at Tusker.

“It offers a great opportunity for employers to simplify their BIK reporting processes and reduce delays. However, starting early is key to make sure organisations are fully prepared by the time April 2027 rolls around.”

Prepare now or risk penalties

Employers should start preparing well in advance to ensure their payroll systems can handle the new real-time reporting requirements and avoid last-minute complications.

They’ll need to check with payroll providers and software suppliers to ensure they are prepared for the new system - conversations with payroll teams should begin as soon as possible to ensure a smooth transition.

The key part of the process for employers is to understand the detailed changes. For example, one common misconception is that payrolling benefits removes all reporting obligations. While a P11D may no longer be required, employers still need to submit a P11D(b) to HMRC with details on benefits provided and Class 1A National Insurance owed as HMRC will penalise companies who don’t submit their reports..

There’s previously been some confusion around whether to use the P46/P11D process or payroll benefits like company cars through tax at source for a variety of benefits, such as salary sacrifice cars. This inconsistency has, in the past, has led to incorrect deductions, delayed payments, and added frustration for employees. These will be addressed with the new payrolling benefits system.

Tusker’s advice is to move quickly and get compliant systems in place early, before the deadline rolls around, as there’s just 10 months to go. As part of the project to change systems, employees need to be made aware of what the changes mean for their payslips - it’ll look different for them, so to avoid confusion, it’s best to communicate early so they know there isn’t anything they need to do (including contacting HMRC).