HMRC has confirmed a phased introduction for mandatory real-time reporting of Income Tax and Class 1A National Insurance contributions on certain benefits in kind (BiKs) and taxable expenses. The new rules, originally set for full implementation in April 2027, will now be rolled out in two phases starting from 6 April 2027.
Phase 1 from April 2027
From 6 April 2027, employers must payroll company cars, car fuel, vans, van fuel, and employer-provided medical benefits in real time. This marks the first phase of the mandatory payrolling system.
Phase 2 from April 2028
Most other benefits in kind will follow from 6 April 2028, giving businesses additional time to adapt their payroll processes. HMRC stated that the phased approach aims to support a smoother transition for employers.
Expert Reaction
Caroline Harwood, BDO’s head of employment tax, criticised the decision, calling it a "half-way house solution" that creates confusion. She noted that employers will have to manage two systems simultaneously, leading to potential taxpayer misunderstandings about payslip changes and tax codes. Harwood argued for a full postponement until HMRC can implement all benefits at once.
