HMRC mandatory payrolling update: phased introduction confirmed

On the 17th June 2026, HMRC updated the guidance on mandatory payrolling of taxable benefits and expenses, announcing a phased introduction of mandatory payrolling from April 2027.

HMRC will introduce the changes in two phases. From April 2027, employers must report the following benefits through FPS and calculate and pay tax and Class 1A National Insurance through PAYE:

• Section F on P11D – company cars and fuel
• Section G on P11D – vans and van fuel
• Section I on P11D – private medical

Employers will continue to report all other benefits on a P11D and Class 1A National Insurance on a P11D(b), or through voluntary payrolling arrangements that require prior HMRC registration.

The new approach gives software providers more time to implement changes to FPS fields so that benefits are reported in the correct fields. This is set to improve data transparency and enable HMRC to manage compliance. With the phased introduction, only 32 fields are required to report the data compared to over 100 required if all other benefits had to be payrolled from April 2027.

We welcome this change but it brings challenges. As some employers could end up with a two tier system. This complicates employee communication by explaining why the change is happening, which benefits employers will report and tax in real time through payroll, and which benefits they will continue to report later on a P11D, as well as the overall affect to employees.

From April 2028, employers will report all remaining benefits through mandatory payrolling. HMRC will continue to exclude accommodation and beneficial loans from the mandatory regime until a later date. Employers can still payroll these benefits voluntarily, subject to prior HMRC registration.

HMRC expects to publish further detailed guidance by the end of July. For a detailed explanation of the wider reforms and what employers should do to prepare, read our guide to mandatory payrolling of benefits in kind from April 2027.

In the meantime, if you have questions regarding payrolling of benefits or would like to discuss how this impacts the information you need to provide to us, please contact our payroll services team who will be happy to help.