Company car and medical benefit reporting is changing
HMRC has confirmed that the move to mandatory payroll reporting of benefits in kind will be introduced in stages from April 2027. The change gives employers more time to prepare, but it will still require adjustments to payroll processes and the way benefits are managed. [gov.uk], [gov.uk]
What is changing?
From April 2027, employers will need to payroll:
- Company cars
- Car fuel
- Vans
- Van fuel
- Private medical insurance
Most other benefits are expected to follow from April 2028. [gov.uk]
Why this matters
Many businesses currently report benefits through annual P11Ds. Under the new system, taxable benefits will be reported through payroll during the year instead.
For employees, this means tax will generally be collected in real time through their monthly pay rather than through adjustments to tax codes. For employers, it means benefit information will need to be accurate and available throughout the year. [gov.uk]
This change will affect organisations of all sizes, including charities, social enterprises, CICs and other purpose-driven businesses that provide company vehicles or private medical cover for staff.
What should you do now?
There is no immediate action required, but employers offering company cars or private medical insurance should start thinking ahead.
In particular, payroll teams will need to know the taxable value of benefits during the tax year. For company cars, that means having the relevant benefit-in-kind percentages and estimated annual benefit values available before the start of the 2027/28 tax year. Payroll software and internal processes may also need updating to handle the new reporting requirements. [gov.uk], [gov.uk]
How we can help
We’ll be monitoring the detailed rules as they develop and helping clients prepare in plenty of time. If your organisation provides company vehicles, private medical insurance or other employee benefits, we can help you understand what information will be needed and ensure your payroll processes are ready for the changes.
If you’d like to discuss how the new rules will affect your organisation, please get in touch.