For years, benefits in kind have had their own little annual rhythm.
The tax year ends.
Someone remembers the P11Ds.
Payroll asks for the information.
HR looks for the paperwork.
The accountant might get involved.
Someone contacts the medical insurance provider.
And eventually, after a certain amount of emailing, spreadsheet hunting and muttering…
We work out what benefits everybody actually had. 😂
But that’s about to change.
From 6 April 2027, mandatory payrolling begins for the first group of benefits in kind, including company cars, car fuel, vans, van fuel and employer-provided medical benefits.
Most other benefits are currently due to follow from April 2028, while beneficial loans and accommodation remain outside mandatory payrolling for the time being.
And although this sounds like a payroll change, I don’t think that’s really the biggest part of it.
It’s an information change.
Because payroll can only report a benefit in real time if somebody tells us about it in real time.
The P11D gave us time
Under the traditional system, most benefits are dealt with after the tax year has finished.
That has historically given everyone an opportunity to gather the information retrospectively.
Who had private medical insurance?
When did they join?
When did they leave?
Did the cost change?
Was a spouse or family member added?
Did someone change cover halfway through the year?
What was the actual taxable value?
You could gather the information, work out the taxable benefits and complete the year-end reporting.
From April 2027, for the benefits included in the first phase, that changes.
The taxable value will be reported through the Full Payment Submission (FPS) and the employee will pay the tax through payroll during the year.
That’s a very different process.
And it means waiting until the end of the tax year to find out what happened isn’t going to work terribly well.
And this is where the insurance companies come in
Private medical insurance is the one I think employers particularly need to start looking at now.
At the moment, an employer may receive an annual renewal document from its insurance provider.
That may be perfectly adequate when somebody is gathering information for an annual P11D exercise.
But payroll is going to need something rather different when that benefit is being dealt with during the tax year.
If somebody joins the medical scheme, we need to know.
If somebody leaves, we need to know.
If their cover changes, we may need to know.
If family cover is added or removed, we may need to know.
And, crucially:
we need to know in time to deal with the payroll.
The insurance company knowing isn’t enough.
HR knowing isn’t enough.
The employee knowing isn’t enough.
The information has to reach payroll.
HMRC is specifically encouraging employers to review their processes with third-party benefit providers and make sure the necessary information will be available for real-time reporting.
So the communication route between:
Insurance Provider → Employer/HR → Payroll
needs to become considerably better.
Because an annual spreadsheet arriving months later with:
“Here’s what everyone had last year.”
isn’t particularly helpful when payroll needed to know last Tuesday. 😂
And then there’s the crossover year…
This is the part I think could catch people out.
When we reach 6 April 2027, we don’t simply close the P11D drawer, wave goodbye and start again.
We still have 2026/27 to finish.
Benefits provided during the tax year ending 5 April 2027 will still need to be dealt with under the existing reporting arrangements where applicable.
That means the final P11Ds for 2026/27 still need to be completed.
Meanwhile, the new 2027/28 tax year has already started.
And for the benefits included in the first phase, payroll will be dealing with those benefits in real time.
So, for a period, we effectively have two years and two processes running alongside each other:
2026/27 benefit
↓
P11D / year-end reporting
↓
HMRC reconciliation
↓
Possible effect on the employee’s tax position
While at the same time:
2027/28 benefit
↓
Payroll
↓
Tax dealt with during the year
That’s important for employees too.
Because someone may look at their payslip and see their current medical benefit being taxed through payroll while also receiving a tax-code change from HMRC.
And understandably they may think:
“Hang on. Am I paying tax on this twice?”
HMRC has said it intends to remove current benefit estimates from employees’ tax codes where those benefits move into mandatory payrolling, specifically to avoid double taxation.
However, an amount being collected through the tax code relating to an earlier tax year, such as an underpayment, can remain.
So the employee could have something relating to the current year’s benefit going through payroll while their tax code is also collecting something relating to a previous year.
That isn’t going to be confusing at all. 😂
Which is why employee communication is going to matter too.
And employers have their own crossover
Then there’s Class 1A National Insurance.
This isn’t only a change to how employees pay Income Tax on their benefits.
There is an employer side too.
Under the current system, Class 1A NIC due on relevant benefits is generally reported after the end of the tax year through the P11D(b) process.
From April 2027, for the benefits included in mandatory payrolling, the associated Class 1A NIC liability will also move into real-time reporting through payroll via the FPS.
So while we’re finishing the old year, an employer could effectively be dealing with:
2026/27
P11Ds for employee benefits.
P11D(b) for the employer’s Class 1A NIC liability.
And at the same time:
2027/28
Current benefits being reported through payroll.
Employee Income Tax being dealt with through payroll.
Employer Class 1A NIC being reported through RTI.
That is quite a change from something many businesses currently think about once a year.
The information has to be right at both ends
And this is why I don’t think employers should wait until March 2027 to think about this.
During the transition, we’re going to need accurate information about two different things.
We need to know what actually happened during 2026/27 so that the final year-end benefit reporting is correct.
But we also need to know what is happening now during 2027/28, because payroll will already be processing the new year’s benefits.
Take private medical insurance.
For the old year, we may be asking:
“What benefit did this employee receive during 2026/27?”
At exactly the same time, for the new year, we’re asking:
“What benefit is this employee receiving now?”
Those aren’t necessarily the same answer.
Someone may have joined.
Someone may have left.
The policy may have renewed.
The premium may have changed.
The employee’s cover may have changed.
And payroll needs the right information for the right tax year.
This isn’t something to sort out in March 2027
HMRC is already telling employers to prepare and has warned that businesses shouldn’t underestimate how long it could take to make their processes robust enough for real-time benefit reporting.
I’d therefore be asking some questions now.
If you provide private medical insurance:
What information will your insurer give you?
How frequently will they provide it?
How quickly will you be told about joiners and leavers?
What happens when someone’s cover changes?
Will you receive the information at employee level?
Who in your business receives it?
And possibly the most important question:
Who is responsible for telling payroll?
Because somebody needs to own that process.
“We’ll sort it out when we do the P11Ds” isn’t going to work in quite the same way anymore.
Employees need to know what’s changing too
There’s another conversation employers need to start thinking about.
Their employees.
People are used to receiving a benefit such as private medical insurance without necessarily seeing the tax on that benefit dealt with directly on their payslip.
That experience is going to change.
And whenever somebody’s take-home pay changes, they quite reasonably want to know why.
So employees need to understand that their benefit is being taxed through payroll.
They may need to understand why their tax code has changed.
And during the crossover period, they may need reassurance that seeing a benefit through payroll and having a tax-code adjustment doesn’t automatically mean they’re being taxed twice.
Because otherwise we know exactly where that question is heading.
Straight to payroll. 😂
P11Ds aren’t disappearing overnight
This is another important point.
April 2027 isn’t the day every P11D disappears.
The first mandatory phase covers company cars, car fuel, vans, van fuel and employer-provided medical benefits.
Most remaining benefits are scheduled to move into mandatory payrolling from April 2028.
Beneficial loans and accommodation remain outside mandatory payrolling for the time being.
So employers may have a period where different benefits are being dealt with in different ways.
Which makes good records and clear communication even more important.
The annual panic needs to become a monthly process
That’s probably the biggest change as I see it.
We’re moving away from:
“What benefits did everybody have last year?”
towards:
“What benefits does everybody have now?”
And that requires a completely different flow of information.
Insurance providers need to communicate with employers.
Employers and HR need to communicate with payroll.
Payroll needs to understand what has changed and when.
Employees need to understand what they’re seeing on their payslips.
And the employer also needs to understand what’s happening with its Class 1A National Insurance.
The payroll software will do the calculations.
HMRC will receive the information.
But somebody still has to make sure the right information reaches payroll at the right time.
And I suspect that’s going to be the part that catches some businesses out.
So if you currently provide company cars, vans or private medical insurance, April 2027 may still feel comfortably far away.
In payroll terms?
It really isn’t. 😂
Now is the time to start talking to your benefit providers, HR team, accountant and payroll provider about how the information is going to move between you.
Because the P11D annual panic may be disappearing.
But only if we don’t replace it with a monthly one. 😂
Every Person. Every Payslip. Every Time.
