Policy paper

Mandatory reporting of benefits in kind in Real Time Information (RTI) from April 2027

Updated 28 October 2026

Who is likely to be affected

Employers that provide taxable benefits in kind to their employees and employees who receive those benefits.

General description of the measure

This measure reforms the way benefits in kind are reported and how tax is paid on them. This means that from April 2027, employers who provide the following benefits in kind will be required to report the benefit through payroll software and deduct tax in real time, alongside other Pay As you Earn obligations:

• medical benefit
• company cars
• vans
• car and van fuel

From April 2028, most remaining benefits in kind, except for employer provided loans and accommodation, will be mandated to be reported and paid in the same way.

Policy objective

The policy aims to modernise the taxation of benefits in kind by integrating their reporting and payment into real-time payroll processes. By moving away from end-of-year reporting, the measure will:

• simplify the system for employers and employees
• improve the transparency of tax liabilities
• ensure tax is calculated and collected more accurately and in a timely manner

This reform supports a more efficient and responsive tax system by reducing reliance on retrospective adjustments and complex processes. This improves clarity for taxpayers and helps businesses comply more easily with their obligations. It contributes to the government’s wider objective of creating a simpler, more digital, and more effective tax system that keeps pace with modern working and payroll practices.

Background to the measure

Under the current system, employers generally report taxable benefits in kind to HMRC after the end of the tax year using form P11D, with the tax usually collected through adjustments to employees’ PAYE tax codes. Since April 2016, employers have been able to choose to payroll certain benefits voluntarily, so that Income Tax is deducted through PAYE in the year the benefit is provided. However, take-up of voluntary payrolling has been limited and many employers continue to use the retrospective P11D process. The move to mandatory payrolling will modernise and simplify reporting, improve transparency for employees and help ensure that the right tax is collected at the right time.

The government first announced this measure in January 2024 and confirmed on 28 April 2025 that more time would be provided to support business readiness. Since then, the government has continued to engage extensively with employers, representative bodies and payroll software developers to refine delivery. Stakeholder feedback highlighted the need for additional time to prepare for implementation and identified particular operational challenges associated with the payrolling of some benefits and customer groups. In response, and to balance the benefits of modernisation with the practical obligations on businesses, the measure will be introduced in phases, with the most common benefits in kind mandated from April 2027 and most remaining benefits mandated from April 2028.

Feedback also indicated that employer-provided loans and accommodation are particularly burdensome to payroll, while the payrolling of benefits provided to globally mobile employees presents additional operational complexities. These benefits and customer groups will therefore remain outside the scope of mandatory payrolling while further work is undertaken to develop approaches that support compliance and minimise administrative burdens. Existing end-of-year reporting arrangements will continue to apply until they are brought within scope at a later date or alternative arrangements are confirmed.

Detailed proposal

Operative date

The measure will have effect from 6 April 2027.

The measure will have further effect from 6 April 2028, when mandatory payrolling will extend to most remaining benefits in kind, completing the phased introduction of the regime.

The operative date does not apply uniformly to all employers and benefit types.

Transitional arrangements mean that certain benefits in kind will remain outside mandation at April 2027 and April 2028.

The registration service for voluntary payrolling will re-open on 5 November 2026.

The voluntary payrolling service will also include the facility to payroll Class 1A National Insurance Contributions.

Current law

Under current law, most benefits in kind are reported annually by employers on form P11D for Income Tax in accordance with provisions in Regulations 85 to 87 of the Income Tax (Pay As You Earn) Regulations 2003 (SI 2003/2682). Income Tax is generally collected after the end of the tax year through PAYE adjustments. Benefits in kind can currently be reported in real-time, on a voluntary basis under Chapter 3A of Part 3 of the Income Tax (Pay As You Earn) Regulations 2003.

The taxation and reporting of benefits in kind is provided for in Part 3 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003).

The liability and reporting requirement on the P11D(b) for Class 1A National Insurance contributions is provided for in Part 8 of the Social Security Contributions and Benefits Act 1992 and associated secondary legislation.

Provisions governing the operation of PAYE, including Real Time Information (RTI) reporting, are contained in the Income Tax (Pay As You Earn) Regulations 2003.

Proposed revisions

This measure will:

• amend Part 11 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) and the Income Tax (Pay As You Earn) Regulations 2003 (SI 2003/2682) to provide a framework for the mandatory payrolling of benefits in kind
• provide power to modify how Schedule 24 Finance Act 2007 applies, so that penalties are not charged in relation to non-deliberate inaccuracies for a limited period of time for a period of one year
• amend Section 147 ITEPA to enable the calculation of the market value of classic cars to the beginning of the tax year

Primary legislation will:

• provide a power to require that benefits in kind to be reported through payroll software in real-time
• provide powers to specify, through secondary legislation, which benefits in kind are in scope and how the requirement will operate
• provide a power to allow penalties not to be charged for non-deliberate inaccuracies for the 2027 to 2028 tax year
• enable a phased implementation of the measure

Secondary legislation will set out the detailed operation of the mandatory payrolling regime. This will include:

• the benefits in kind that must be payrolled
• benefits in kind that are excluded from mandatory payrolling
• the information employers must report through Real Time Information (RTI)
• how taxable benefits and associated Class 1A National Insurance contributions are to be reported and paid
• arrangements for correcting errors
• transitional provisions to prevent the application of penalties for non-deliberate inaccuracies for the 2027 to 28 tax year
• providing for specified globally mobile employee benefits to remain outside the scope of mandatory payrolling
• the re-opening of the new registration service for voluntary payrolling which will include the facility to payroll Class 1A National Insurance contributions and employer provided loans and accommodation

Summary of impacts

Exchequer impact (£ million)

2026 to 2027	2027 to 2028	2028 to 2029	2029 to 2030	2030 to 2031	2031 to 2032
Empty	+30	+35	+40	+45	+50

This figures above combine costings from:

• Autumn Budget 2024 — confirming plans to mandate the reporting of benefits in kind through payroll software from April 2026, which is set out in Table 4.2 of Budget 2025
• Budget 2026 — benefits in kind (BiKs) to delay mandatory payrolling of company cars, vans, fuel and medical benefits from 6 April 2026 to 6 April 2027, with most remaining benefits in kind implemented from 6 April 2028 which is set out in Table 6.1 of Budget 2026

Both costings have been certified by the Office for Budget Responsibility.

Economic impact

This measure will be formally assessed once costings have been certified by the Office for Budget Responsibility but is not expected to have any significant macroeconomic impacts.

Impact on individuals, households and families

This measure is expected to affect employees who receive benefits in kind where these are mandated for reporting through payroll software, or where employers choose to do so. The measure will not apply to up to an estimated 235,000 employees who are deemed to be globally mobile.

HMRC currently receives information about benefits in kind in the form of approximately 3.5 million P11D forms each year, constituting one per employee per employment. Moving to reporting of benefits in kind through payroll will mean employees pay tax in real-time on benefits that are mandated, and on benefits that employers elect to report in this way. This is expected to improve the accuracy of tax paid during the year and reduce the need for end-of-year adjustments.

This measure is expected to impact individuals’ experience of dealing with HMRC. The change to reporting will require some familiarisation, and some individuals may have tax deducted for benefits in kind in real-time and some may pay these taxes through the current process. However, HMRC will provide clear guidance advising them of the change and their obligations. It is anticipated that over time these changes will simplify the process.

During the first two years of implementation, some individuals may pay tax on benefits in kind received in the current year through payrolling while also paying amounts relating to previous tax years through the existing process.

When mandatory payrolling begins, HMRC will remove the current-year mandated benefit from an employee’s tax code to prevent the same benefit being taxed twice. Where overlap occurs, it will generally relate to liabilities for different tax years rather than double taxation of the same benefit.

HMRC expects the number of employees affected by such overlap to be limited. While HMRC does not anticipate a significant risk of hardship, some employees may experience higher deductions during the transition period than they expected. HMRC will provide guidance and communications to support employers and employees through the change, and individuals experiencing financial difficulty will be able to contact HMRC to discuss their circumstances.

The measure is not expected to impact on family formation, stability or breakdown.

Equalities impacts

This measure may apply to individuals regardless of their protected characteristics. If a protected group is estimated to be overrepresented in this population it is considered to be disproportionately impacted.

The population impacted by this measure are more likely to be working age individuals. In the customer group impacted by the April 2027 changes, individuals aged between 25 and 54 are estimated to be overrepresented, making up 77% of the impacted population, compared to their prevalence in the UK adult population (46%). Males are also estimated to be overrepresented, making up 70%, compared to their prevalence in UK adult population (49%). Individuals belonging to a White ethnic background are estimated to be overrepresented in the impacted population (90%) compared to their prevalence in the UK adult population (87%). Where data were available there were no other protected groups overrepresented.

Mandatory payrolling will be extended in April 2028. HMRC does not currently hold data on the protected characteristics of individuals impacted by this extension and so cannot assess if there are any disproportionate impacts.

Administrative impact on business including civil society organisations

This measure is expected to have a significant administrative impact on around 280,000 employers who currently report benefits in kind through end-of-year processes, by requiring them to report certain benefits through payroll software. Employers will be able to choose to also report non-mandated benefits through payroll, and it is anticipated that many will choose to do so in order to avoid dual-running both end-of-year and payroll reporting processes.

Up to an estimated 21,000 employers could have globally mobile employees who receive benefits in kind. It is expected that reporting benefits for globally mobile employees through payroll would present challenges for employers, as would reporting employer-provided loans and accommodation. While further work is undertaken to explore options, these customers and benefits are not currently included in scope for mandation. Employers with globally mobile employees in receipt of benefits in kind will be required to register them with HMRC accordingly and, as with those whose employees receive employer-provided loans and accommodation among other benefits, are more likely to need to dual-run reporting processes in the interim. HMRC will work with Administrative Burdens Advisory Board to minimise administrative burdens where possible.

One-off costs for employers are expected to include familiarisation with the new legislation and reporting system, registering relevant benefits with HMRC (including non-mandated benefits, where the employer elects to report these through payroll), registering current globally mobile employees with HMRC, updating payroll systems and processes, and training staff.

Ongoing costs are expected to include providing HMRC with information about relevant benefits in kind more frequently, registering new globally mobile employees with HMRC, and dual-running end-of-year and payroll reporting systems where relevant. Ongoing savings are expected to include reduced agents’ costs, and removal of some obligations that businesses are no longer required to undertake such as the administrative tasks involved in end of year reporting.

Estimated one-off impact on transitional businesses costs

One-off impact	(£ million)
Costs	8
Savings	nil

Estimated continuing impact on administrative burden

Continuing average annual impact	(£ million)
Costs	0.8
Savings	18.8
Net impact on annual administrative burden	18

This measure is expected to have an impact on businesses’ experience of dealing with HMRC. The change to reporting will require some familiarisation, and some businesses may need to report and deduct Income Tax and Class 1A National Insurance contributions on benefits in kind in real-time using payroll software and some may have to report and pay after the end of the tax year. However, HMRC will provide clear guidance advising them of the change and their obligations. It is anticipated that over time these changes will simplify the process.

This measure is expected to impact civil society organisations in their capacity as employers in the same way as other businesses.

Operational impact (£million) (HMRC or other)

HMRC will need to make changes to IT systems to support safe implementation of this measure. These changes are currently expected to cost in the region of £10 million.

HMRC will also update guidance and develop other approaches to help support customers, to enable real-time reporting of benefits in kind through RTI.

Other impacts

Other impacts have been considered and none have been identified.

Monitoring and evaluation

The measure will be monitored using data collected through RTI and through ongoing engagement with stakeholders, including employers and payroll software providers.

HMRC will assess the effectiveness of the measure in improving accuracy and reducing administrative burdens as part of its wider evaluation programme.

Further advice

If you have any questions about the draft primary legislation for mandatory payrolling of benefits in kind, contact the employment income policy team by email: employmentincome.policy@hmrc.gov.uk.