A Simple Guide to the Big Changes for Employee Benefits in April 2027
A Simple Guide to the Big Changes for Employee Benefits in April 2027
There are some important changes coming to the way businesses report employee benefits, including company cars and private health insurance.
From April 2027, HMRC is introducing mandatory payrolling of most benefits in kind, replacing the traditional end-of-year P11D reporting process with reporting through your regular payroll.
It’s a significant change for employers, but with a little forward planning, the transition should be straightforward. We’ve put together a simple guide to explain what’s changing, what it means for your business and how you can prepare.
The Timeline: What Changes and When?
HMRC is introducing these changes in two phases to give businesses and software providers time to adjust:
- Phase 1 (From 6 April 2027): You must payroll the most common benefits. This includes company cars, company vans, fuel, and private medical or dental insurance.
- Phase 2 (From 6 April 2028): You must payroll almost all other benefits, such as gym memberships or non-cash vouchers.
The Exceptions: Low-interest loans and company housing are excluded from the mandatory rules for now.
What this means for your cash flow
Currently employers pay National Insurance (Class 1A) on employee perks as one big lump sum in July, after the tax year ends.
From April 2027, you will calculate and pay this National Insurance monthly through your normal PAYE payroll.
Watch out for the overlap year: In July 2027, you will pay your final annual National Insurance bill for the previous year (2026/27). At the exact same time, you will also be paying the new monthly National Insurance on your current payroll. It will be important to plan your budget for this one time double payment.
Set up: No registration needed
You do not need to register with HMRC to payroll the main Phase 1 benefits. From April 2027, the system updates automatically.
HMRC will adjust your employees' tax codes before April 2027 so they don't get taxed twice. However, because the tax is taken out monthly, their take-home pay might look a little different. It is a good idea to let them know in advance.
If Wild & Co Chartered Accountants run your payroll we will be in touch in early 2027 to let you know if we need any further information from you. If you have any questions about the changes to employee benefits please get in touch.
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