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The mandatory payrolling of benefits: preparing for April 2027
Susan Ball, Employment Tax Partner, and Richard Travis Nash, Associate Director, RSM UK, provide a practical guide to areas to focus on when planning for the mandatory payrolling of benefits from April 2027
A s confirmed in the June issue of Professional (https://ow.ly/ boXO50W1qM7), the UK Government announced an extension to the date by which payrolling of benefits in kind (BiKs) and taxable employment expenses will become mandatory, apart from for loans and living accommodation. This will now take effect from April 2027. This significant change aims to streamline the reporting and taxation of employee benefits, aligning them with the real time information (RTI) system used for regular payroll reporting. The extension is a welcome relief, but employers shouldn’t underestimate the work needed, particularly where they have multiple benefits and providers. They should use this extra time wisely. This article outlines some of the key aspects of this transition and provides a timeline for employers to consider to implement the necessary changes, divided into milestones.
cash equivalent of each benefit, dividing it by the number of pay periods, and including that value within the payroll cycle. However, from April 2027, this process will become mandatory for most BiKs, through the full payment submission (FPS) under the RTI system. Key changes and implications The mandatory payrolling of benefits will bring several changes.
they adjust to real-time taxation. Employers will need to communicate these changes clearly to their staff. Timeline for implementation To ensure a smooth transition, employers should prepare a project plan and timeline. Specifically, what’s needed will depend on the benefits provided, but to help we’ve provided a suggestion divided into milestone dates.
Tax year 2025/26
Real-time reporting Income tax and Class 1A National
July - September 2025 1. Begin by reviewing the technical note from HM Revenue and Customs (HMRC) (https://ow.ly/9kXl50W1qFm) and understanding the new requirements. Identify which benefits will be affected and assess current payroll systems. 2. Keep an eye out for the draft legislation and technical specifications due to be issued by HMRC in this period. 3. Identify the stakeholders who need to be involved, including payroll, human resources, finance, etc. 4. Work out where the benefit information is held. Map out all the benefits provided, including net pay benefits, renewal dates
Insurance contributions (NICs) will be calculated on benefits and expenses and reported in real-time. Elimination of P11D forms The traditional P11D and P11D (b) forms, used to report benefits at the end of the tax year, will largely become obsolete. Other than for loans and living accommodation, or potentially certain employees such as globally mobile staff. Employee impact Employees may experience a short-term cash flow impact, particularly in the first year of a benefit or mandatory payrolling, as
Understanding the payrolling of benefits
Currently, employers have the option to voluntarily payroll certain BiKs for income tax purposes. This involves calculating the
| Professional in Payroll, Pensions and Reward | July-August 2025 | Issue 112 16
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