HMRC delays full introduction of new benefits in kind rules
The government will phase in mandatory real-time reporting of tax and national insurance contributions for certain benefits in kind (BIK) and taxable expenses.
HMRC had previously planned to introduce mandatory payrolling for all BIK from April 2027, but will now introduce this in phases, having gathered feedback on the measures. Phase one will begin from 6 April 2027, and phase two will commence from 6 April 2028.
From April next year, mandatory payrolling of BIKs will be phased in for company cars, car fuel, vans, van fuel and employer-provided medical benefits.
HMRC will provide draft data item guidance to reflect the removal of 94 real-time information (RTI) data fields for BiKs in company payrolls, it said.
Benefits in kind
It will also engage with stakeholders and industry experts to resolve outstanding issues, such as the possible introduction of voluntary Class 1A reporting for non-mandated benefits.
As part of phase two, the mandatory payrolling of most other BIKs will be introduced, excluding loans and accommodation, which will remain voluntary.
Ahead of this, HMRC said it will continue to work with software developers on an approach to RTI specifications, which will be published in 2027.
Final guidance regarding phase one will be published “to align with the Autumn Budget 2026”, the government added.
HMRC has claimed that the changes to payrolling will make it easier for employees to understand what they are paying tax on, and enable them to pay tax on benefits in real time rather than in arrears. The requirement was initially due to be introduced this year.
Caroline Harwood, head of employment tax at BDO, said: “While mandatory payrolling of company car, car fuel, vans, van fuel and employer-provided medical benefits will be introduced from April 2027, most other benefits in kind will be added from April 2028.
“This will put extra pressure on employers which will now have to contend with two systems rather than one. It will also lead to confusion among taxpayers as to why their payslip has changed for some, but not necessarily all, benefits, what their tax code means, and what to expect during and at the end of the tax year.
“There is a strong argument to say that the whole scheme should be postponed until such time as HMRC is ready to implement the payrolling of all BIKs at the same time.”
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