Are You Ready for the Payroll Employee Benefits Changes in 2027?
Payroll Employee Benefits are changing, and employers need to prepare for new reporting requirements. Another significant change to payroll is now only six months away.
From 6 April 2027, employers will have to report and account for tax on several common benefits in kind through payroll in real time.
The first phase covers company cars, car fuel, vans, van fuel and employer-provided medical benefits.
At present, many employers deal with benefits after the tax year has ended using forms P11D. The new system brings the tax consequences into the payroll process throughout the year.
That makes preparation important.
Employers should start by identifying exactly which benefits they provide and to whom. Company vehicles may be obvious, but private medical insurance can involve larger groups of employees and changes during the year.
The next question is whether your existing payroll software will be ready.
From April 2027, the relevant benefit information will be included within the Full Payment Submission, or FPS, which employers already use to report salary and employee details to HMRC. Payroll processes will therefore need accurate information about benefits as they arise rather than waiting for an annual P11D exercise.
Employers should also review their internal procedures to ensure that changes to employee benefits are communicated promptly. Clear responsibilities between HR teams, managers and payroll administrators can help prevent errors, reduce unnecessary administration and support accurate reporting.
This may require better communication between whoever arranges benefits and whoever operates payroll. Suppose an employee changes company car halfway through a month or joins the company medical scheme. How quickly does the payroll team find out?
That seemingly simple question could expose a weakness in the current process.
Preparing for Payroll Employee Benefits Reporting
The change is being phased. Most other benefits are expected to move into mandatory payrolling from April 2028, while employment-related loans and accommodation have separate arrangements.
Employers should also consider whether their current policies and employee records provide the information needed for the new requirements. Reviewing these arrangements early can help identify gaps before the changes take effect. For guidance on workplace policies, you can also explore our Employment Law Advice services.
There is no need to wait until next April.
Make a list of the benefits your business currently provides, establish which employees receive them, and check that your payroll provider or software will support the new reporting requirements.
Six months is plenty of time to prepare.
It becomes considerably less comfortable if the first review takes place when the April payroll is already being processed.
Get Your Payroll Employee Benefits Ready With Payroll Services
Preparing for Payroll Employee Benefits changes now can help your business improve record keeping, coordinate employee information, and reduce the risk of reporting errors. Our payroll services can help you review your payroll arrangements and prepare for the upcoming requirements.
