Preparing for Payrolled Benefits: P11D Changes from April 2027

From 6 April 2027, employers must report company cars, vans, fuel and medical benefits through payroll instead of on a P11D after the tax year ends. With payrolled benefits, Income Tax and Class 1A National Insurance are dealt with during the year, so your payroll needs the right information from the first pay run of 2027/28.

The change arrives in stages through Finance Bill 2026-27, and P11Ds will not disappear straight away. This guide explains what is changing, how it may affect your cash flow and what to do before April.

Which Benefits Are Affected and When?

From	Benefits	Reporting
6 April 2027	Company cars, car fuel, vans, van fuel and employer-provided medical benefits	Mandatory through payroll
6 April 2028	Most other benefits in kind	Mandatory through payroll
No mandatory date	Loans and accommodation	Voluntary through payroll

You do not need to register to payroll the benefits in the first phase. If you want to payroll loans or accommodation in 2027/28, HMRC’s registration service re-opens on 5 November 2026, with a deadline of 5 April 2027. Existing registrations continue unless you withdraw by that date, and any Class 1A National Insurance on those benefits must also go through payroll.

HMRC’s guidance on mandatory payrolling was still interim when this article was written, so some of the detail may change. Employers can also ask HMRC to exclude eligible globally mobile employees, who will stay on P11Ds, using a form due in November 2026.

Why You Will Still Need P11Ds for Now

Benefits provided in 2026/27 stay under the current process. Forms P11D and P11D(b) for that year are due by 6 July 2027, and any Class 1A National Insurance is due by 22 July 2027, or 19 July if you pay by cheque.

Benefits outside the first phase also stay on a P11D for 2027/28, unless you have registered to payroll them voluntarily. Many employers will therefore run both systems for at least a year, which makes it important to be clear which route applies to each benefit.

How Payrolled Benefits Could Affect Cash Flow

The biggest short-term change may be the timing of Class 1A National Insurance. It is currently paid in one amount after the tax year ends, but tax on payrolled benefits and the related Class 1A will be reported through payroll during the year.

That creates a one-off overlap in 2027/28. You will pay the July 2027 bill for 2026/27, while also paying Class 1A on your payrolled benefits for 2027/28.

For example, assume a company car has a taxable value of £6,000 in both years and your payroll runs monthly. At the current 15% rate, Class 1A is £900 a year, assuming the rate stays the same. You would pay £900 in July 2027 for 2026/27, plus about £75 a month for 2027/28, giving a total of £1,800 across 2027/28.

The annual cost does not change, but two years of Class 1A would fall into one. If you provide several cars or a wider medical scheme, it is worth including this in your cash flow forecast now.

What Employees Should Be Told

Employees with first-phase benefits are likely to see changes to their tax codes and payslips. HMRC will remove these benefits from tax codes before April, and tax will be taken through payroll instead. Tax codes can still collect underpayments from earlier years, so some employees may feel they are paying twice.

The benefit itself is not changing, but people may still question a different take-home figure. A short explanation before April can help avoid queries when the first payslips arrive.

How to Prepare for Payrolled Benefits

1. List your benefits. Record each benefit and taxable expense, who receives it and whether it falls into April 2027, April 2028 or the voluntary group.
2. Check your payroll process. Ask your payroll software provider or bureau how and when they will support mandatory reporting.
3. Gather the data. Car reporting is likely to need details such as make, CO2 emissions and fuel type, so confirm where this information is held and who will maintain it.
4. Agree how changes reach payroll. New cars, changes to medical cover, joiners and leavers will need to be passed on promptly, not saved for the year end.
5. Plan for the Class 1A overlap. Include both the July 2027 payment and the in-year payments in your 2027/28 forecast.
6. Decide on loans and accommodation. Consider whether voluntary payrolling suits you before registration closes on 5 April 2027.
7. Brief employees. Explain what will change and when they will see it on their payslips.

How Nichols & Co Can Help

Payrolled benefits touch payroll, cash flow and year-end reporting, so it helps to review them together. Our payroll services can help you work out which benefits are affected and prepare for the first pay run of 2027/28. The wider changes are covered in our Autumn Budget 2026 summary.

If you provide company cars, vans or medical cover, contact Nichols & Co to talk through what the change means for your business.