Mandatory payrolling of benefits in kind delayed
The government has revised plans to introduce the mandatory payrolling of benefits in kind from 6 April 2027, which will now be limited to company cars, vans, fuel and medical benefits. What's the full story?
Due to feedback, the government has announced that the mandatory payrolling of benefits in kind will be phased in over two years. Previously it was announced that all benefits in kind aside from employer-provided accommodation and loans would need to be reported through payroll from 6 April 2027. However, mandatory payrolling will now only apply to company cars, vans, fuel and medical benefits from 6 April 2027. Further technical guidance will be released in July 2026.
From 6 April 2028, mandatory payrolling will apply to all other benefits in kind, apart from employer-provided accommodation and loans. Employer-provided accommodation and loans can be payrolled on a voluntary basis, although they are difficult to value in real time.
Where a benefit in kind is payrolled, both the employer and employee pay tax on the benefit each month, instead of after the end of the tax year. It is hoped that a phased approach will make the transition easier for businesses, but this is still a major change for employers. Company cars and medical benefits are some of the most commonly provided benefits in kind so the burden on businesses to implement new processes, and the impact on cash flow remains significant ahead of 6 April 2027.
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