How does payrolling benefits work in the UK for 2026/27?

Full answer

Payrolling benefits is the alternative to the traditional P11D process. Instead of reporting benefits annually on P11D and having HMRC adjust employee tax codes the following year, employers add the cash equivalent value of each benefit to the employee's taxable pay in each pay period. HMRC then collects the Income Tax through the normal PAYE process throughout the year. How to register: employers must register to payroll specific benefits using HMRC's online service before the start of the tax year (before 6 April). You cannot start payrolling mid-year. For 2026/27, the key change is that HMRC has been moving towards mandatory payrolling of benefits, with a phased approach. Employers that already payroll must continue; new joiners to payrolling must register before 6 April 2026. Benefits that can be payrolled: most BIKs including company cars, car fuel, private medical insurance, and non-cash vouchers. Benefits that cannot currently be payrolled: employer-provided living accommodation and interest-free loans (these must still be reported on P11D). Class 1A NI: even when benefits are payrolled, Class 1A NI is still reported and paid via P11D(b) by the employer (13.8% on benefit values). The P11D(b) deadline remains 6 July. Employee communication: employers must tell employees which benefits are being payrolled so employees do not double-pay through incorrect tax codes. HMRC should automatically adjust codes, but employees should check their tax code notices. Advantages: avoids end-of-year P11D administration, employees pay correct tax in-year rather than facing a large underpayment, and removes the risk of employees being surprised by a large tax code reduction in the following year.

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More answers

• What is a P11D form and when does it need to be filed for 2026/27?
• How are benefits in kind reported to HMRC in the UK?