HMRC has recently refreshed its interim guidance for the next major payroll change affecting employers: the phased move from year-end benefits-in-kind reporting to real-time payroll reporting. The first mandatory phase starts on 6 April 2027, so autumn 2026 is the point when finance and payroll teams should turn policy awareness into a practical implementation plan.
The change matters because it is not only a reporting-format update. For the benefits in scope, employers will move Income Tax and Class 1A National Insurance reporting into the payroll cycle. That can affect payroll configuration, data flows between HR and finance, month-to-month checks and cash-flow planning.
What becomes mandatory from 6 April 2027?
HMRC’s current guidance says phase one will apply to five common benefits: company cars, car fuel, vans, van fuel and employer-provided medical benefits. Employers will report the taxable values through the Full Payment Submission, the same RTI submission used to report pay and employee details.
| Benefit | From 6 April 2027 | Main preparation question |
|---|---|---|
| Company cars | Mandatory real-time payrolling | Can payroll receive accurate vehicle and availability data before each pay run? |
| Car fuel | Mandatory real-time payrolling | Are private-fuel changes captured quickly enough to avoid stale taxable values? |
| Vans | Mandatory real-time payrolling | Can finance and payroll distinguish taxable van use from exempt arrangements? |
| Van fuel | Mandatory real-time payrolling | Is benefit data available in time for the relevant payroll date? |
| Employer-provided medical benefits | Mandatory real-time payrolling | Can policy, renewal and employee-coverage changes flow into payroll reliably? |
Most other benefits are expected to move into mandatory payrolling from April 2028. Employer-provided loans and accommodation remain outside that wider mandation for now, with HMRC saying a mandatory timetable for those benefits will be confirmed later.
What changes in the payroll process?
From April 2027, the affected benefits will be reported on the FPS at payroll dates during the year. HMRC says the FPS will contain additional fields for company cars, fuel, vans and private medical benefits so that it can see the benefit data needed to calculate and monitor the correct tax and Class 1A National Insurance position.
That means the quality of upstream data becomes more important. A benefit change that used to be corrected or finalised during a year-end P11D process may now need to reach payroll much sooner. Employers should therefore map who owns each data item, where it originates and what cut-off applies before payroll is finalised.
The cash-flow issue finance teams should model now
HMRC highlights a one-off transition effect that is easy to miss. In July 2027, employers may still need to pay Class 1A National Insurance relating to benefits provided in the 2026 to 2027 tax year under the existing annual process. At the same time, Class 1A National Insurance on phase-one benefits provided from April 2027 will start being reported and paid in real time through payroll.
The exact cash effect depends on the benefits you provide and your payroll calendar, so the sensible preparation step is not to guess a generic percentage increase. Instead, estimate the prior-year Class 1A amount, forecast the new recurring payroll liability and make sure the finance team understands when both may hit cash.
What about benefits that are not mandatory in phase one?
HMRC plans to reopen registration in November 2026 for employers that want to voluntarily payroll non-mandatory benefits from April 2027. The current guidance gives 5 April 2027 as the registration deadline for voluntary payrolling of those benefits. This can include benefits such as employment-related loans and accommodation, although employers should review the final guidance before making process decisions.
HMRC’s 17 September Agent Update also says employers that voluntarily payroll non-mandated benefits from April 2027 will need to pay the associated Class 1A National Insurance through payroll as well. In other words, employers should evaluate the administrative and cash-flow consequences together rather than treating voluntary payrolling as a purely tax-code decision.
A six-step preparation checklist for autumn 2026
- Inventory the benefits you currently provide and identify which employees receive company cars, fuel, vans, van fuel or employer-provided medical cover.
- Map the data owner for each benefit. Decide whether HR, finance, fleet management, a broker or another team holds the information payroll will need.
- Ask your payroll software provider how it will support the new FPS fields and when the relevant update will be available. HMRC’s guidance says technical specifications are being updated for the April 2027 requirements.
- Test cut-off dates and exception handling. Work out what happens when a car changes, medical cover starts or ends, or benefit information arrives after payroll has been prepared.
- Build the 2027 Class 1A transition into your cash-flow forecast, including the potential overlap between the final annual payment for 2026 to 2027 and new real-time payments from April 2027.
- Decide whether you want to voluntarily payroll any non-mandatory benefits from April 2027, then revisit that decision when HMRC opens the registration service and publishes further final guidance.
Keep watching HMRC guidance through the autumn
The current material is still described by HMRC as interim guidance, and HMRC has said technical specifications and further guidance will continue to be updated. That makes this a preparation period rather than a reason to hard-code assumptions too early.
For small businesses, the best response is to separate what is already clear from what is still being finalised. The 6 April 2027 start date, phase-one benefit categories and move to FPS reporting are established planning points. Detailed software implementation and some operational edge cases should still be checked against the latest HMRC guidance before payroll changes are put live.
Use the change to tighten the link between payroll and finance
Mandatory payrolling will make benefit data part of a more regular finance rhythm. That is an opportunity to improve controls beyond compliance: reconcile benefit-provider invoices, keep employee changes aligned with payroll, forecast employment costs more accurately and make Class 1A liabilities visible earlier.
Cherry Money’s role in that wider workflow is the connected finance layer around invoicing, expenses, reconciliation, reporting and cash-flow visibility. Employers should still confirm benefits-in-kind payroll capability with their payroll software provider, but better finance records can make the transition easier to monitor and less likely to become a year-end surprise.
Sources and further reading
- Mandatory payrolling of benefits in kind and expenses – The phased introduction of mandatory payrolling for benefits in kind — HM Revenue & Customs / GOV.UK
- Mandatory payrolling of benefits in kind and expenses – Reporting requirements — HM Revenue & Customs / GOV.UK
- Mandatory payrolling of benefits in kind and expenses – Getting ready for mandatory payrolling of benefits in kind — HM Revenue & Customs / GOV.UK
- Issue 147 of Agent Update — HM Revenue & Customs / GOV.UK
- Mandatory reporting of benefits in kind in Real Time Information (RTI) from April 2027 — HM Revenue & Customs / GOV.UK
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