From 6 April 2027, company cars, car fuel, vans, van fuel and private medical benefits have to be reported through payroll in real time rather than on a P11D after the year ends. You do not need to register for that. Employment related loans and accommodation are excluded and stay voluntary, but if you want to payroll those you must register by 5 April 2027.
The change was originally set for April 2026 and was pushed back a year to give everyone more time. Phase 1 lands in April 2027 and phase 2 in April 2028.
What mandatory payrolling means
Today, most small companies report benefits once a year. The benefit is provided during the tax year, the P11D goes in after the year ends, and the employee pays the tax afterwards, usually through an adjustment to their tax code.
Mandatory payrolling of benefits in kind replaces that with real time reporting. The taxable value goes through the payroll in the period the benefit is provided, and the tax comes off as the benefit is received rather than a year or more later.
For a one director company that sounds like a small administrative change. It is not, because it changes when the director pays the tax, and in the first year it changes their take home pay in a way that needs explaining before it happens.
Which benefits in kind are covered
The split matters, because it determines whether you have to do anything at all.
| Benefit | From 6 April 2027 | Do you register? |
|---|---|---|
| Company cars | Mandatory | No |
| Car fuel | Mandatory | No |
| Vans | Mandatory | No |
| Van fuel | Mandatory | No |
| Private medical | Mandatory | No |
| Employment related loans | Voluntary | Yes, by 5 April 2027 |
| Living accommodation | Voluntary | Yes, by 5 April 2027 |
That bottom section is the one owner managed companies should look at hardest. A director with an overdrawn loan account has an employment related loan, and it is precisely the benefit that stays outside mandation. So the change does not sweep everything up neatly. Some of your reporting moves and some of it does not.
When you have to register
You do not register for the mandatory benefits. HMRC applies that automatically.
You do register if you want to voluntarily payroll the non-mandatory ones. HMRC has said the registration service goes live in November 2026, and the deadline to register for the 2027/28 tax year is 5 April 2027. HMRC encourages employers who intend to register to do it as soon as the service opens rather than waiting.
Missing a registration deadline is a quiet sort of mistake. Nothing fails on the day. You simply spend another full year doing the old process for those benefits.
Why your April 2027 payslip may look wrong
This is the part worth understanding before April 2027 rather than during it.
Ready for the start of mandatory payrolling, HMRC will automatically remove benefits in kind from employees’ tax codes. The current year is then taxed in real time through payroll, which is the whole point of the change.
But HMRC is deliberately keeping the existing process for collecting underpayments from earlier years. Those do not come out of the tax code. So an employee who still owes tax on a benefit from a previous year carries on paying that through their code, at the same time as paying real time tax on this year’s benefit.
From the payslip, that looks like being taxed twice on the same car. It is not. It is this year’s tax and last year’s catch up arriving together. HMRC’s guidance is explicit that employers need to explain this, and that the wording used has to be very clear.
In an owner managed company you are usually both the employer doing the explaining and the employee receiving the shock, so it is worth knowing in advance. If you have staff with company cars or private medical, they will ask, and the answer needs to be ready before the first payslip lands. It also interacts with how you take money out of the company generally, which is covered in our guide to paying yourself from a limited company.
What happens to the P11D
It is being restructured rather than abolished, and the difference matters.
Benefits that become mandatory move to payroll. Benefits that stay voluntary still have to be reported the old way if you choose not to payroll them. The change is also phased across two years, so April 2027 is not a clean switch off. Anyone telling you the P11D has been scrapped is ahead of the facts.
Benefits in kind also feed your own tax return, so a change in how they are reported is worth reading alongside the director Self Assessment changes that came in for 2025/26.
The dates that matter
- November 2026 the registration service for voluntary payrolling opens
- 5 April 2027 deadline to register to payroll non-mandatory benefits for 2027/28
- 6 April 2027 phase 1, mandatory payrolling begins
- 6 April 2028 phase 2
HMRC was still working through outstanding issues with industry over the summer of 2026, including whether to allow voluntary Class 1A reporting for non-mandated benefits. The interim guidance and the April 2027 changes paper are where any movement will show up first, so treat the detail as firm on direction and still settling on mechanics.
What to do before payrolling becomes mandatory
HMRC’s own advice is to prepare at least a year ahead, which means this is the window rather than a next year problem.
- List the benefits you actually provide. For most small limited companies it is a short list, often just a car or private medical, and sometimes nothing at all. Employer pension contributions are not a taxable benefit in kind, so they are not caught by any of this.
- Check whether any of them fall in the voluntary column. If you have a director’s loan or provide accommodation, decide now whether you want to payroll it.
- If you do, diarise November 2026 to register, not April 2027 to remember to.
- Ask your payroll software provider what they are doing. Real time benefit reporting is a change on their side too, and you want to know before the tax year starts, not after.
- Warn anyone with a company car or private medical about the tax code change, before the first payslip of 2027/28 rather than after it.
If you are not sure which of these applies to you, tell us what benefits your company provides and we will tell you what changes and what does not. For a lot of small companies the honest answer is that very little changes, and it is worth knowing that rather than assuming the worst.
Frequently Asked Questions
Phase 1 starts on 6 April 2027 and phase 2 on 6 April 2028. The start date was moved back a year from April 2026 to give employers and software developers more time.
Company cars, car fuel, vans, van fuel and private medical benefits. You do not need to register to payroll these, because they become mandatory automatically.
No. Employment related loans and accommodation are excluded from mandation and stay voluntary. If you want to payroll them you have to register, and the deadline to register for the 2027/28 tax year is 5 April 2027.
No, but it can look that way. HMRC removes the benefit from the tax code so the current year is taxed in real time, while any underpayment from an earlier year stays in the code and is still being collected. Two things are being paid at once, but they relate to different years.
Not entirely. Mandated benefits move to real time payroll reporting, but the change is phased across 2027 and 2028 and benefits that stay voluntary still need reporting if you do not payroll them. Treat it as a restructuring rather than an abolition.