If you thought payroll had finally settled down after all the recent changes… think again!
The Government has announced another significant update that’s set to change the way employers report employee benefits to HMRC. From April 2027, payrolling benefits will become mandatory, meaning the familiar P11D process we’ve all known (and, perhaps, tolerated!) will become a thing of the past.
Don’t panic just yet – there’s plenty of time to prepare. But it’s definitely a change worth getting on your radar now.
So, what’s actually changing?
Currently, many employers report taxable benefits – such as company cars, private medical insurance or beneficial loans using P11D forms after the end of the tax year. Employees then pay any tax due through adjustments to their tax code, often months after receiving the benefit.
From April 2027, those benefits will instead need to be reported through payroll in real time. That means the tax due will be deducted as employees are paid, rather than catching up later.
In short:
- P11Ds will no longer be the standard way of reporting most benefits
- Payroll becomes responsible for reporting taxable benefits throughout the year
- Employees should pay the correct tax at the right time, reducing unexpected tax bills
Why is HMRC making the change?
The aim is to simplify the tax system and improve accuracy.
By collecting tax on benefits through payroll as they happen, HMRC hopes to reduce errors, make tax codes more accurate and eliminate much of the end of year administration that comes with P11Ds. It’s all part of the ongoing move towards real time reporting and digital payroll.
What does this mean for employers?
For many businesses, especially those that haven’t voluntarily payrolled benefits before, this will mean reviewing current payroll processes and making sure payroll software is ready for the change.
It’s also likely to encourage closer working between payroll, HR and finance teams, as benefit information will need to be shared accurately and promptly throughout the year.
The good news? Once the new process is up and running, many businesses could actually find year-end reporting simpler and more effficient.
Is there anything you should be doing now?
Although April 2027 might feel a long way off, preparing early will make the transition much smoother.
Now is a great time to:
- Review which employee benefits your business currently provides.
- Check whether your payroll software will support mandatory benefit reporting.
- Speak to your payroll provider about what changes you’ll need to make.
A little planning now could save a lot of headaches later.
We’re here to help
Changes to payroll legislation can feel overwhelming but that’s exactly why we’re here.
At Pixie Payroll, we keep a close eye on payroll developments so you don’t have to. Whether you’re a small business employing your first member of staff or a larger organisation managing multiple payrolls, we’ll help you navigate the upcoming changes with confidence.
As we get closer to 2027, we’ll be sharing practical advice, updates and tips to help businesses across Cornwall prepare for mandatory payrolling of benefits.
After all, payroll never stands still but with the right support, neither do you.