Published: July 2026 | Fact-Checked & Audited By: David Vance, CTA FCA (Chartered Tax Advisor & Accountant)
This guide is fully updated for the 2026/27 HMRC tax year and complies with the latest HMRC legislation.
The UK government has officially confirmed the introduction of mandatory payrolling of Benefits in Kind (BiKs) starting 6 April 2027. This is a massive change for both employers and employees. Employers will no longer be allowed to report key benefits (like company cars, fuel, and medical insurance) via year-end P11D forms. Instead, they must calculate and deduct the appropriate tax directly from employees’ wages through their monthly payroll software (PAYE), which you can model in real-time with our Payslip Estimator.
Mandatory Payrolling Timeline (April 2027 & April 2028)
To give businesses sufficient time to adapt their payroll software systems, HMRC is rolling out mandatory payrolling in two distinct phases:
| Phase | Effective Date | Covered Benefits in Kind (BiKs) |
|---|---|---|
| Phase 1 | 6 April 2027 | Company Cars, Car Fuel, Private Medical Insurance, and Gym Memberships. You can run BIK cost comparisons using our Company Car Tax Calculator. |
| Phase 2 | 6 April 2028 | All remaining benefits in kind, including accommodation, interest-free loans, and assets. |
How Mandatory Payrolling of BiKs Affects Take-Home Pay
Currently, under the legacy P11D system, an employee receives a benefit in kind (such as private healthcare) and the tax is collected in the *following* tax year by modifying their tax code (e.g. reducing their personal allowance from 1257L to a lower code). This creates a delay between receiving the benefit and paying the tax.
Under the new 2027 mandatory payrolling rules:
- Real-Time Tax Deductions: The cash equivalent of the benefit is divided by your payroll frequency (e.g., 12 for monthly payroll) and added to your gross pay *only for tax calculation purposes*.
- Immediate Budgeting: Your monthly take-home pay will be lower immediately during the month you enjoy the benefit, but your tax code will remain clean and stable.