P11D changes 2027: What employers need to know
For years, P11Ds have been a familiar part of the tax-year calendar. From April 2027, that process starts to change as HMRC brings the reporting and taxation of certain Benefits in Kind (Bik) into payroll. For employers, this is not simply a new reporting requirement. It will affect systems, data, responsibilities and the way changes are explained to employees. Understanding what moves first, what follows later and how to prepare now will make the transition easier, while creating a useful opportunity to review whether your wider benefits strategy is working as effectively as it should.
Quick answer:
From 6 April 2027, employers must payroll company cars, car fuel, vans, van fuel, and employer-provided medical benefits, reporting Income Tax and Class 1A National Insurance through payroll in real time. Most other Benefits in Kind will follow from April 2028, while employer-provided loans and accommodation will move later. Employers should start mapping affected benefits, reviewing payroll and data processes, and planning clear employee communications now.
In a hurry? Here are our top three takeaways from our blog on what employers need to know about the 2027 P11D changes.
1. The change is phased: Five benefit categories move to mandatory payrolling in April 2027; most others follow in April 2028, with loans and accommodation moving later.
2. Preparation is cross-functional: HR, reward, payroll, finance and benefits providers need accurate, connected data and compatible processes.
3. Employees need clarity: Explain what will change on payslips, why it is changing and where people can get support before the new process starts.
Got time to stick around? Let's dive a little deeper.
What is changing with P11Ds from April 2027?
Currently, employers that use the P11D and P11D(b) process report Benefits in Kind (BiK) and expenses to HMRC retrospectively. The current process is manual, with employees not always paying the Income Tax owed on their benefits in the same year they receive them.
From 6 April 2027, mandatory real-time reporting begins for a first group of benefits.
The change means that payroll teams will have to report the included benefits through payroll software and Real Time Information (RTI), instead of at the end of the year as an annual event.
| Before the changes | After the changes |
|
Annual, retrospective reporting Relevant benefits are reported after the end of the tax year, usually through P11D and P11D(b) forms. |
Real-time payroll reporting Benefits within each mandatory phase are reported through payroll software and Real Time Information. |
|
Tax collected later Employees may pay tax in arrears or through an adjustment to their tax code. |
Tax dealt with closer to real time Income Tax is deducted through PAYE as the benefit is provided. |
|
Benefits data gathered for year-end HR, reward, finance, payroll and providers may contribute information at different stages. |
Benefits data feeds payroll processes Accurate, timely and connected information becomes essential throughout the year. |
|
Limited visibility for employees The connection between a benefit and the tax paid on it may be less immediate. |
Greater payslip visibility Employees can see the tax impact of payrolled benefits more closely alongside the benefit received. |
HMRC says the change should mean that 3.5 million people will no longer have their Income Tax collected in arrears and that most employers will eventually no longer need to complete P11D or P11D(b) forms.
However, that doesn't mean every P11D disappears on 6 April 2027, as this is very much a phased transition.
What is payrolling Benefits in Kind?
Payrolling Benefits in Kind means bringing the reporting and taxation of relevant employee benefits into payroll.
It moves the system away from relying primarily on an annual, retrospective P11D process towards reporting and collecting the relevant tax through PAYE in real time. HMRC's objective is to make it easier for employees to understand what they are paying tax on, rather than paying tax in arrears or on an estimated basis through their tax code.
- For employees, that should create a closer connection between the benefit they receive and the tax they pay on it.
- For employers, it means benefits information increasingly becomes payroll information too.
This comparison is an important call-out.
Benefits might traditionally have involved HR, reward, procurement, finance, external providers and payroll at different stages. Real-time reporting makes the quality and flow of that information increasingly important.
So, this isn't simply a tax-year-end change for payroll teams to worry about later. It is an operational change employers need to prepare for.
Quick takeaway:
Payrolling turns benefits data into payroll data, making joined-up systems, accurate information and clear ownership essential.
Which benefits must be payrolled from April 2027?
The first phase of mandatory payrolling begins on 6 April 2027 and covers company cars, car fuel, vans, van fuel, and employer-provided medical benefits. For these benefits, mandatory reporting will move into payroll and RTI from April 2027.
That makes this first phase particularly relevant for employers with established company car, fleet or employer-funded healthcare arrangements.
Quick takeaway:
April 2027 is the beginning of the change, not the point when every benefit moves across.
Which benefits will not need to be payrolled until April 2028?
The second phase is due to begin in April 2028, when mandatory payrolling will extend to most remaining BiK. However, this phase excludes employer-provided loans and accommodation, as the date for these becoming part of mandatory payrolling is yet to be confirmed.
For employers with a broad benefits package, this phased journey is beneficial from an admin perspective, but it also makes mapping your benefits important.
Ask: What do we offer today? Which benefits fall into the April 2027 phase? Which fall into April 2028? Are any outside mandatory payrolling for now?
That basic exercise provides a much clearer starting point for conversations between HR, reward, payroll, finance and your providers.
Quick takeaway:
Map every benefit against the relevant phase now so each team knows which reporting process applies and when.
| Timing | Benefits affected | What employers need to know |
| From 6 April 2027 | Company cars, car fuel, vans, van fuel and employer-provided medical benefits | Mandatory reporting moves into payroll and RTI for these benefits. |
| From April 2028 | Most remaining benefits in kind | Mandatory payrolling expands, so employers with broader benefits packages need to prepare for a second phase. |
| Date to be confirmed | Employer-provided loans and accommodation | These remain outside the April 2028 expansion until HMRC confirms a later mandatory start date. |
Will employers still need to complete P11Ds after April 2027?
In some circumstances, yes, and this is probably one of the most important points to understand about the change. P11Ds aren't simply being switched off for every benefit in April 2027.
Mandatory payrolling is being introduced in phases. April 2027 covers company cars, car fuel, vans, van fuel and employer-provided medical benefits. Most other benefits do not move into mandatory payrolling until April 2028, with mandatory payrolling of loans and accommodation coming later.
HMRC's longer-term intention is that most employers will no longer need to complete P11D or P11D(b) forms once mandatory real-time reporting is established. For now, the important word is most.
Employers need to understand which reporting process applies to each benefit during the transition rather than assuming the entire P11D process ends in April 2027.
Quick takeaway:
Do not assume P11Ds disappear in April 2027; employers may need to manage different reporting routes during the phased transition.
How will payrolling benefits affect employees?
Payrolling benefits means employees will see the tax implications of certain employee benefits every month, rather than at the end of the tax year. It doesn’t mean they pay more or less tax than before; it will just appear in their monthly tax calculations.
Tax reporting can feel like an employer issue right up until something changes on an employee's payslip. That's why communication needs to form part of preparation.
One of HMRC's stated reasons for mandatory payrolling is to make it simpler for employees to understand what they are paying tax on. That greater visibility has value.
Employees don't necessarily think about benefits in the language employers use to administer them. They think about the car they drive, the healthcare they can access, the money leaving their payslip and what their overall employment package gives them.
When something in that experience changes, explaining what's happening and why matters, and that's particularly important in the wider economic context.
As we explored in our Autumn Budget analysis, changes to employment costs and personal taxation don't exist in isolation. They can affect disposable income and financial wellbeing, so HR and finance need to understand what policy changes ultimately mean for people.
A benefits strategy can be technically compliant and still create confusion if employees don't understand it. Clear communication therefore needs to sit alongside the payroll work.
Quick takeaway:
Tell employees what will change on their payslip before it happens, using clear language and a straightforward route for questions.
What does mandatory payrolling mean for employers?
There are two sides to the change: compliance and operational.
Compliance
HMRC is modernising benefits reporting by moving away from end-of-year processes towards real-time payroll reporting. The department says the change is intended to make the tax system more transparent and efficient and reduce administrative burdens.
Operational
Employers need to understand how the benefits they provide connect with the data required for payroll.
HMRC's interim guidance is specifically designed to help organisations prepare their systems and processes for real-time reporting from April 2027. It also notes that HMRC has shared technical specifications with software developers. So, this shouldn't sit with one team:
- Payroll needs accurate information.
- HR and reward need visibility of the benefits being provided.
- Finance needs to understand the implications for reporting and cost.
- Benefits providers may hold information needed elsewhere in that process.
The more fragmented that journey is, the more important it becomes to understand how information moves between each part.
Quick takeaway:
Treat mandatory payrolling as a shared operational change, not a payroll-only project.
What should employers do now to prepare for April 2027?
April 2027 might still feel some distance away, but this isn't a project to leave until the end of the tax year. A sensible starting point is to get the right people around the same table so you can map your benefits offering, understand what's affected, align stakeholders, and plan your communications strategy.
1. Map the benefits you currently provide
Build a clear picture of your benefits landscape.
Identify which benefits fall into the April 2027 phase, which move across from April 2028 and whether you provide loans or accommodation that remain outside mandatory payrolling for now. HMRC's current guidance sets out the phased categories.
2. Understand where your benefits data sits
Look beyond the list of benefits.
Who provides the data? Who receives it? How does payroll currently get the information it needs? Where are different benefits administered?
Mandatory real-time reporting makes this a good moment to examine the connections between benefits administration and payroll.
3. Bring HR, payroll and finance together
Policy changes rarely affect one function in isolation.
Our 2025 Autumn Budget deep dive highlights the importance of HR and finance working closely to understand cost, personal taxation, disposable income and the implications for employee wellbeing.
P11D reform provides another practical reason to have those conversations now.
4. Speak to your payroll and benefits providers
HMRC's guidance confirms that technical specifications are being developed and updated around the reporting requirements.
Understand what the change means for the systems and suppliers you rely on, and what information will need to move between them.
5. Plan how you'll communicate the change
Don't make an employee's payslip the first place they discover something has changed. Think about what employees actually need to know, when they need to know it and how you'll make a fairly technical subject easy to understand.
The objective isn't to turn everyone into a payroll expert. It's to give people enough clarity to understand what's changing, what it means for them and where they can go if they have questions.
Quick takeaway:
Start with benefits mapping, then test data flows, clarify responsibilities, speak to providers and build the employee communication plan.
What does the P11D change mean for your employee benefits strategy?
When we bring employee benefits strategy into the equation, the conversation becomes bigger than P11Ds. Compliance is the immediate trigger, but it isn’t the end of the discussion. Changes to reporting create a natural opportunity to revisit your wider benefits ecosystem.
Ask yourself:
- Which benefits do you provide?
- How are they administered?
- How easy are they for employees to understand and use?
- Are different schemes sitting across disconnected platforms and processes?
- Most importantly, are they delivering enough value to justify the cost and effort behind them?
This final question matters more than ever as organisations balance employment costs against employees' everyday financial pressures.
Cost efficiency shouldn't come at the expense of employee wellbeing or organisational resilience. The objective is to make the money already being invested in people work harder, with benefits that can create meaningful value in employees' real lives.
The P11D changes won't answer those questions for you, but they do give you a good reason to start asking them. Reviewing how a benefit is taxed and reported is one thing. Understanding whether people actually value it is another.
Quick takeaway:
Use the reporting change to test whether every benefit is easy to administer, understood by employees and delivering meaningful value.
P11D change is a compliance challenge. It's also a chance to take another look.
The transition to mandatory payrolling will inevitably require technical work, but for HR and reward leaders, it also creates a bigger opportunity.
Use the change as a prompt to understand your benefits properly: what you offer, how you administer them, what they cost, and, crucially, the value employees actually get from them.
Because the goal shouldn't simply be to build a benefits strategy that works for payroll. It should work for people too.
Key takeaway:
Start preparing for mandatory payrolling as a joined-up compliance, data, and communication project, and use the transition to ensure your benefits deliver value for the organisation and its people.
FAQs
Are P11Ds being abolished in April 2027?
No, not completely. Mandatory payrolling is being phased in. Certain benefits move to mandatory real-time reporting from 6 April 2027, with most remaining benefits following from April 2028. Mandatory payrolling of employer-provided loans and accommodation will come later. HMRC says most employers will eventually no longer need to complete P11D or P11D(b) forms.
When does mandatory payrolling of benefits start?
The first phase begins on 6 April 2027.
Which benefits must be payrolled from April 2027?
Company cars, car fuel, vans, van fuel and employer-provided medical benefits fall within the first phase of mandatory payrolling.
Which benefits move to mandatory payrolling in April 2028?
HMRC says mandatory payrolling will extend to most remaining benefits in kind from April 2028, excluding loans and accommodation.
What happens to employer-provided loans and accommodation?
Mandatory payrolling for employer-provided loans and accommodation will be introduced later. HMRC has not yet given a date for when this will become mandatory.
Why is HMRC introducing mandatory payrolling?
HMRC says the move will modernise benefits reporting, shift it from retrospective year-end processes to real-time reporting, make it easier for employees to understand the tax they pay on benefits, and simplify the process for employers and HMRC.
What should employers do before April 2027?
Start by understanding which benefits your organisation provides and where they sit within the phased changes. From there, review the systems and processes involved and bring together the teams responsible for benefits, payroll and finance. HMRC has published interim guidance to help organisations prepare their systems and processes for the move to real-time reporting.
Further reading:
Autumn 2025 Budget: From savings to sustainability
Autumn Budget 2025: What HR leaders need to know about employment costs and benefits
The 2025 Autumn Budget: Employer and Employee Impacts
What the 2025 Autumn Budget means – in layman’s terms
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