The Timetable
| Tax year | What is mandatory to payroll |
|---|---|
| 2026/27 | Nothing. Payrolling is voluntary, and P11Ds continue for benefits that are not payrolled |
| 2027/28 | Company cars, car fuel, vans, van fuel and private medical |
| 2028/29 onwards | Most remaining benefits in kind |
| To be confirmed | Employment-related loans and living accommodation, which can be payrolled voluntarily from April 2027 |
What "Payrolling" Means
Instead of reporting a benefit on a P11D after the year ends, and HMRC collecting the tax through the employee's tax code the following year, the value of the benefit is added to the employee's taxable pay each pay day. The tax is collected at the time, in the right year, at the right rate.
For the employee, a payrolled benefit:
- is taxable: it is added to taxable pay each period
- is not subject to employee National Insurance: it does not count as NI-able pay
- shows on the payslip as a notional amount, so that tax is charged on it without it being paid as cash
For the employer, the benefit carries Class 1A National Insurance, 15% in 2026/27. This is a separate charge from the employer's ordinary Class 1 contributions, with its own rate.
How the Amount Per Period Is Worked Out
Take the benefit's cash equivalent for the year and spread it across the pay periods that remain. An employee given private medical cover worth £1,200 a year from the start of a monthly payroll has £100 added to taxable pay each month.
Two details matter:
- Spread over the periods remaining, not the whole year. A benefit starting in October is divided across October to March. Spreading it back over April to September would disturb periods already taxed.
- Round down, and let the last period take the remainder. Rounding up would tax the employee on more than the benefit is worth.
If the value changes during the year (a different car, a change in cover), recalculate what remains across the periods still to run.
What Changes on the FPS from 2027/28
HMRC's 2027/28 Full Payment Submission carries the benefits themselves, not just a total:
- The value of each mandated benefit type, this period and year to date
- The Class 1A National Insurance due on them, this period and year to date
- For a company car, the vehicle: make and model, date first registered, CO2 emissions, fuel type, list price, the date it was made available, and the cash equivalent for the year
That last point is the one to prepare for. Car details that today go on a P46(Car) or a P11D will be needed in the payroll software before the first pay run of April 2027.
Class 1A in Real Time
Today Class 1A is declared once a year on the P11D(b) and paid by 22 July. For payrolled benefits from April 2027 it is reported on each FPS and paid with the monthly PAYE remittance. Budget for it monthly: for an employer with a fleet of company cars the change in cash flow is noticeable.
What Happens to P11D and P11D(b)
They continue for benefits that are not payrolled: in 2027/28 that means anything outside the five mandated types that the employer has not chosen to payroll, and loans and accommodation unless payrolled voluntarily. A benefit that has been fully payrolled is not also reported on a P11D.
Preparing a Client
- List who has which benefits. Start with last year's P11Ds.
- Collect the car details for every company car: registration date, CO2 figure, fuel type, list price and accessories, any capital contribution, and whether fuel is provided.
- Get the cash equivalents for 2027/28 once the rates are published.
- Tell the employees. Their tax codes will stop collecting the benefit and their payslips will start showing it. Without an explanation, both look like mistakes.
- Check the tax codes in April 2027. A code that still includes last year's benefit while payroll also taxes it charges the employee twice.
How Payburo Handles It
Payburo payrolls benefits in kind today, on a voluntary basis for 2026/27. You enter the annual cash equivalent, and each pay run adds the period's share to taxable pay, leaves National Insurance alone, and works out the employer's Class 1A. Company car details are recorded against the benefit, ready for the 2027/28 FPS.