If you provide benefits to employees or directors, such as company cars, private medical insurance or other taxable perks, you may already be familiar with P11D forms.
The way these benefits are reported to HMRC is changing, but the latest plans are slightly different from those originally announced. Mandatory payrolling of benefits in kind was initially expected from April 2026 and was subsequently delayed until April 2027. HMRC has now confirmed that the changes will be introduced in phases, giving employers and payroll providers more time to adapt.
So, what does this mean for your business?
What Is a P11D?
A P11D is used to report certain benefits in kind provided to employees and directors.
Benefits in kind are non-cash benefits or perks that have a taxable value. They can include things such as:
- company cars and fuel;
- private medical insurance;
- interest-free or low-interest loans;
- living accommodation; and
- other taxable employee benefits.
Employers may also need to submit a P11D(b) to report the Class 1A National Insurance due on benefits provided.
Currently, many benefits are reported to HMRC after the end of the tax year. Although some employers already payroll certain benefits voluntarily.
What’s Changing to P11Ds from April 2027?
From 6 April 2027, the first phase of mandatory payrolling of benefits in kind will begin.
Initially, mandatory payrolling will apply to:
- company cars;
- car fuel;
- vans;
- van fuel; and
- employer-provided medical benefits.
Instead of waiting until after the end of the tax year to report these benefits on a P11D, employers will need to report them through payroll software using Real Time Information (RTI). Income Tax and Class 1A National Insurance relating to these benefits will therefore be dealt with in real time through payroll. This is a significant change for employers who currently rely on year-end P11D reporting.
What Happens from April 2028?
The second phase is planned from 6 April 2028, when mandatory payrolling will extend to most other benefits in kind. There are, however, some exceptions.
Employer-provided loans and living accommodation are not currently included in mandatory payrolling from April 2028. HMRC has said that the timetable for making these benefits mandatory will be confirmed at a later date.
Employers will have the option to payroll these benefits voluntarily from April 2027.
This means P11Ds aren’t disappearing completely in April 2027. For a period of time, businesses may have some benefits being reported through payroll while others continue to require year-end reporting.
Why Is HMRC Changing the System?
The aim is to move away from retrospective reporting and towards a more real-time system. Rather than employees receiving a benefit during the year and the tax being dealt with later, more benefits will be reported and taxed as they are provided. HMRC says this should make tax liabilities more transparent, improve accuracy and reduce reliance on year-end adjustments. For employers, however, it means payroll processes and systems need to be ready to capture the right information at the right time.
What Should Employers Do Now?
April 2027 may still feel some way off, but it’s worth starting to prepare. Look at the benefits you currently provide to employees and directors and identify which will fall into the first phase of mandatory payrolling.
It’s also worth speaking to your payroll provider or checking your payroll software to make sure it will be ready for the new reporting requirements. Perhaps most importantly, review how information about benefits currently reaches whoever processes your payroll. Under real-time reporting, having accurate and timely information will become increasingly important. Getting the right processes in place before April 2027 should make the transition considerably smoother.
Need Help Preparing for the P11D Changes?
The move towards mandatory payrolling is a significant change to the way benefits in kind are reported, and the phased introduction means different benefits will be treated differently over the next few years.
At Greystone Advisory, we can help you understand which benefits are affected, review your current payroll processes and prepare for the changes ahead. If your business provides benefits in kind and you’re unsure what the new rules mean for you, get in touch.
