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Delayed but still en route: exploring the new mandatory payrolling of benefits timeline
Lora Murphy MCIPPdip, CIPP Editor, provides all the latest updates regarding the mandatory payrolling of benefits, which was recently delayed by a year
O n 28 April 2025, several Treasury, James Murray, regarding a range of tax administration and simplification measures. Of those updates, the one most payroll professionals will have been acutely aware of was the one which confirmed that the mandatory payrolling of benefits is being delayed. Originally this was due to come into effect from 6 April 2026, but this has now been pushed back to 6 April 2027. The Government cited that the rationale behind this is to give more time for announcements were made by the Exchequer Secretary to the software providers, employers, tax agents and other stakeholders to prepare for the change. So, there’s now an additional year before they’ll be required to report income tax and Class 1A National insurance contributions (NICs) on most benefits in kind (BiKs) and expenses. Some have commented that they believe the reason for the delay in the announcement was so that many were fully prepared to payroll benefits from April 2026 already and will proceed in this way despite the delay. Subsequently, the process can be tested and monitored by HM Revenue and Customs (HMRC) throughout 2026/27, and any issues ironed out before it becomes a legal requirement. A technical note was released alongside the announcement and, as always, the devil is in the detail. We now have further operational information concerning how it will all work. The technical note can be accessed in full here: https://ow.ly/ Z9ZE50VJAmW.
“The Government cited that the rationale behind this is to give more time to software providers, employers, tax agents and other stakeholders to prepare for the change”
Employment-related loans and accommodation Currently, pretty much any employer- provided benefit can be payrolled, with the exceptions of interest-free and low interest loans, and living accommodation provided by the employer. It was previously advised, following the autumn 2024 Budget that employment- related loans and accommodation would be mandated to be reported in the same way as all other BiKs at a later date than the originally scheduled 6 April 2026. Employers were to be given the opportunity to voluntarily payroll those BiKs from April 2026. However, the latest update confirms that employment- related loans and accommodation can be payrolled on a voluntary basis from April 2027. It’s expected that the registration service for the voluntary payrolling of loans and accommodation will open in November 2026 and there’ll be a requirement to register to use the service prior to the start of the new tax year. A timeline for mandatory payrolling of these BiKs will be set out in due course. To allow voluntary payrolling of these BiKs, the use of estimated figures to include in the taxable value calculation within the tax year will be allowed.
Penalties and interest Readers will be relieved to learn that, where errors have been made in relation to mandatory payrolling in real time information (RTI) returns for tax year 2027/28, there’ll be no charged penalties for inaccuracies. This is in all cases except those where there’s been deliberate non-compliance. However, existing late filing and late payment penalties and statutory late payment interest for RTI returns will still apply in that first year of mandatory payrolling. If the P11D and P11D(b) process is still being used, the penalties which currently apply will remain unchanged. This could be where employment-related loans or accommodation are offered, and they aren’t payrolled. For 2028/29 onwards, penalties and interest will follow a similar pattern to those applied now to voluntarily payrolled BiKs and expenses. Further details will be shared regarding this once draft guidance is made available. Payroll reporting processes The taxable value of BiKs and expenses will be reported through the full payment submission (FPS). This means that the number of reporting fields on the FPS
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| Professional in Payroll, Pensions and Reward
| June 2025 | Issue 111
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