For as long as most business owners can remember, benefits in kind have worked the same way. You give an employee or a director something that is not cash, a company car or private medical insurance, and you tell HMRC about it once a year on a form P11D, months after the tax year has ended. That arrangement is coming to an end.
From 6 April 2027, the most common benefits have to be reported through your payroll, on every pay day, in real time. The P11D does not vanish overnight, but for most small companies it is on the way out. Here is what is changing and what is worth doing now.
What has to be payrolled from April 2027
The change is being brought in in phases, which is a sensible piece of caution on HMRC’s part. Phase one covers four categories:
- Company cars and car fuel.
- Vans and van fuel.
- Private medical insurance.
- Other employer-provided medical and dental benefits.
Between them these account for the large majority of benefits provided in the United Kingdom, which is exactly why they go first. If your company provides a car or pays for a health policy, you are in phase one.
Most other benefits in kind follow from April 2028. Loans and living accommodation are being left out of the mandatory rules for now, with a start date still to be confirmed, so an overdrawn director’s loan account carries on being reported the way it is today.
What real time reporting actually means
At the moment, a benefit is a once a year job. You work out its value after 5 April, file the P11D by 6 July, and the company pays Class 1A National Insurance, currently 15 per cent, by 22 July.
From April 2027, the value of the benefit goes into your Full Payment Submission, the return your payroll software already sends HMRC each time you pay someone. The Income Tax and the Class 1A National Insurance are reported as the year goes along rather than in one payment the following summer. Where a benefit still sits outside the payroll, such as a loan, an annual return is still needed for that.
Three practical consequences follow, and they are the ones worth thinking about rather than the mechanics.
Employees see the tax sooner. Instead of a benefit being collected through an adjusted tax code, often a year later, the tax comes off in the month the benefit is given. Take-home pay changes. Nobody enjoys discovering that from their payslip, so it is a conversation to have before April 2027 rather than after.
The company’s cash flow shifts. Class 1A National Insurance that used to be paid in one lump each July gets spread across the year instead. For most small companies that is easier, not harder, but the July payment and the monthly payments overlap in the changeover year, so it is worth knowing in advance.
You have to value benefits at the start of the year, not the end. This is the real change of habit. A P11D lets you work out the number when you already know what happened. Payrolling means estimating it up front and correcting it as you go. Car benefits are straightforward once the list price and the emissions figure are in front of you. Medical policies that change mid-year need a little more attention.
What this means if you run a small limited company
Most of our limited company clients have exactly one benefit in kind, and it is usually private medical insurance for the director. If that is you, this is a modest change handled by your payroll software and your accountant, not a project.
If the company provides a car, it is worth a proper look. Company cars have become a much more finely balanced decision in recent years, and having the tax appear every month rather than once a year tends to concentrate the mind on whether the arrangement still earns its place.
And if the company provides nothing beyond salary and dividends, which is true of a great many owner managed companies, none of this touches you at all.
What to do between now and April 2027
There is no deadline in the next few months, and no form to send. Three things are worth doing calmly during 2026 and early 2027.
- Write down what your company actually provides. Not what you think it provides. The forgotten health policy that renews quietly every year is the one that causes trouble.
- Check your payroll software is on the case. HMRC is issuing updated technical specifications to software providers in autumn 2026. Anything mainstream will handle it. Anything homemade or very old may not.
- Consider payrolling voluntarily first. You can already payroll benefits by choice, and doing it a year early turns a mandatory change into something you have already practised. Voluntary payrolling has to be registered with HMRC before the tax year starts, so the window for the 2027 to 2028 year closes on 5 April 2027. From April 2027 you do not need to register for the benefits that are mandatory anyway.
HMRC has signalled a relaxed approach to penalties while employers adjust, in the same spirit as the first year of Making Tax Digital. That is reassuring rather than a reason to leave it.
We deal with this so you do not have to
Payroll, benefits and the filings that go with them are part of what we run for limited company clients as a matter of course, alongside the accounts, the Corporation Tax return and the Companies House dates. When April 2027 arrives, our clients will find that their payroll simply carries on and the P11D quietly stops appearing.
Ltd Company Starter is from £105 per month, and Growing Strong, for companies wanting more planning through the year, is from £205 per month. Both are fixed fees, with no charge for picking up the phone.
If you would rather someone else tracked all of this, Get your instant quote and see your fixed monthly fee in under a minute.