From April 2027, HMRC will mandate payrolling of benefits in kind, moving away from year-end P11D reporting toward real-time payroll deductions, with full payrolling anticipated by April 2028 and a phased rollout.

Phase 1, starting 6 April 2027, will cover company cars and fuel, vans and van fuel, and employer-provided medical benefits, affecting the majority of P11D-reported items; Phase 2, from April 2028, will extend to all other benefits except employer-provided living accommodation and beneficial loans.

Class 1A National Insurance contributions will shift from an annual post-tax-year payment to real-time payroll calculation and payment, creating a transitional overlap in 2027/28 where both methods apply for certain periods.

Employers should audit benefits to distinguish Phase 1 items from Phase 2 items, ensure payroll software supports real-time benefits and Class 1A NICs, update budgets for real-time NIC payments, inform employees, and coordinate with benefit providers to supply timely data.

Penalties for errors in RTI returns in 2027/28 are limited only if there is no deliberate non-compliance, though late filing and late payment penalties still apply.

For internationally mobile staff, plan for benefits being taxed as they arise rather than via year-end adjustments, and adapt payroll processes for secondments and cross-border group arrangements.