P11D Changes in April 2027: What Payrolling Benefits Means for Your Business.

Written by the ChadSan payroll team. Reviewed by Hannah Toghill. Last updated 29 October 2026.

If your business gives anyone a company car, pays for their fuel or covers their private health insurance, this change is about you. If you’ve never heard the word P11D before, that’s fine too. This guide explains it from the very beginning, in plain English, with no accountant speak.

The changes at a glance

First, what is a “benefit in kind”?

A benefit in kind is a perk. It’s something your company pays for that an employee gets to use or enjoy on top of their salary. HMRC sees it as part of what that person earns, so tax is due on it, even though no cash changes hands.

• A company car they can use personally
• Fuel for that car
• A company van they take home
• Private medical insurance or health cover
• Other extras, like gym memberships, vouchers or a cheap loan from the company

Two lots of tax come from a perk. The employee pays income tax on its value. The company pays an extra type of National Insurance on it, called Class 1A. That second one is a bill for the business, not the employee. For the wider rules on perks, staff events and the tools founders put through the business, read our guide to the tax rules on perks UK founders need to know.

How perks are taxed today: the P11D system

1. You give your team their perks throughout the year.
2. After the tax year ends on 5 April, you fill in a form called a P11D for each person, listing their perks and what they’re worth. It’s due by 6 July.
3. You also fill in a P11D(b). This works out the company’s Class 1A National Insurance bill on all those perks, which you pay by 22 July (19 July if you pay by cheque).
4. HMRC then changes each employee’s tax code to collect the tax they owe on their perks, usually in the following tax year.

In other words, the tax is sorted out a long time after the perk was enjoyed. The Chartered Institute of Taxation points out that it can take up to 15 months. Some employers already skip the P11D by “payrolling” perks voluntarily, but most don’t.

What’s changing in April 2027?

From 6 April 2027, the tax on certain perks has to come out of pay every payday, just like the tax on salary. This is called payrolling benefits in kind. Instead of a form once a year, the value of the perk is added to the employee’s pay in your payroll software, the right tax is taken off, and the details go to HMRC every time you run payroll.

HMRC is bringing this in over two years. On 15 June 2026 it confirmed a phased approach, and the Autumn Budget on 28 October 2026 confirmed that timetable again.

• Phase 1, from 6 April 2027: company cars, car fuel, vans, van fuel and employer provided medical benefits, such as private medical insurance.
• Phase 2, from 6 April 2028: most other perks, including things like vouchers, assets you give or lend to staff, and services you pay for on their behalf.
• Staying optional: loans to employees and living accommodation. These can stay on a P11D or be payrolled by choice.

Phase 1 sounds small, but it covers the big ones. HMRC estimates that the perks in phase 1 make up 92% of everything currently reported on P11Ds, and more than 3.5 million employees receive a taxable perk today.

Is the P11D being scrapped?

Not quite, and this is where a lot of articles get it wrong. The P11D survives, but its job shrinks. From April 2027 it becomes one of several ways to report perks, rather than the default for all of them.

So for one year at least, many businesses will run two systems side by side: payroll for cars and health cover, and a P11D for everything else. That’s the bit that catches people out.

What happens to the company’s National Insurance on perks?

The P11D(b), the form that works out the company’s Class 1A bill, is narrowing in exactly the same way.

• Phase 1 perks: Class 1A is worked out and paid every payday, through payroll, alongside the employee’s tax. These perks come off the P11D(b) completely.
• Perks still on a P11D: Class 1A stays on the P11D(b) and is paid once a year, as now.
• Perks you choose to payroll: HMRC hasn’t confirmed yet how Class 1A works for these. We’ll update this guide when it does.

The July 2027 double bill

This is the one to put in your diary. In July 2027 you’ll still pay Class 1A for perks given in 2026/27, the old way, in one lump sum. But by then you’ll also have been paying Class 1A every month on cars and medical cover since April 2027. Two sets of payments land in the same year. If you give a lot of perks, it’s worth taking the time to plan the cash properly.

A simple example

The total tax doesn’t change. What changes is when it’s paid, and who has to do the work to make it happen.

What this means for your employees

• Their payslip will look different. The value of their perk will show on it, and the tax on it will come out every payday.
• Their tax code will change. HMRC will stop adjusting tax codes for phase 1 perks, because payroll is collecting that tax instead.
• They won’t pay more tax overall. The amount is the same. It’s just collected now, not later.
• Year one might feel like paying twice. Someone still paying off tax on last year’s perks through their tax code will also have this year’s tax taken through payroll. If that causes genuine money worries, they can contact HMRC to talk it through.
• No P11D for payrolled perks. They’ll see the value on their payslips and year end paperwork instead.

A short, friendly note to your team before April saves a lot of confused questions after it. Tell them what’s changing, when, and that their overall tax isn’t going up.

Should you payroll your other perks voluntarily?

You can choose to move other perks, like accommodation or beneficial loans, onto payroll from April 2027 too. HMRC’s sign up window opens in November 2026 and closes on 5 April 2027. Miss it and you’ll wait another year.

The upside is having everything in one place and no P11Ds to do. The catch is that HMRC hasn’t yet confirmed how the company’s National Insurance will work for perks payrolled by choice. If you’re unsure, talk it through with an adviser before the deadline rather than after.

Is there a grace period?

Partly. For the 2027/28 tax year, HMRC says it won’t charge penalties for honest mistakes in payrolling perks, as long as they aren’t deliberate. But penalties for filing late or paying late still apply as normal. So the easing is a safety net for errors, not a reason to leave it until March.

Who does this affect most?

Any business that gives staff a car, a van, fuel or private medical cover. That includes plenty of growing tech businesses and games studios, where private health cover is a popular perk for winning new hires, and where electric cars offered through salary sacrifice count as company cars for tax purposes. It catches retail businesses running delivery vans, and media and entertainment companies that offer health cover to keep their talent. It also includes directors who have a company car through their own limited company.

Your checklist before April 2027

1. List every perk you give. Write down who gets what, then sort each one into: payroll from April 2027, payroll from April 2028, or optional.
2. Ask your payroll software provider if it’s ready. It needs to report perks and work out Class 1A every payday. Software providers are still receiving final technical details from HMRC, so ask early and ask for a date.
3. Line up your data. Payroll needs the right value for each perk every month. That means getting details from your insurer, leasing company or fleet provider on time, including when someone joins, leaves or changes their cover.
4. Decide on voluntary payrolling for accommodation or loans before 5 April 2027.
5. Plan for the July 2027 double bill in your cash flow forecast.
6. Tell your team what’s changing and why their payslip will look different.
7. Test it. Run a practice payroll with real perk data in early 2027, not the week before go live.
8. Keep your P11D process going for the 2026/27 forms due by 6 July 2027, and for any perks still on a P11D during 2027/28.

Frequently asked questions

Is the P11D being scrapped in 2027?

No, not completely. From 6 April 2027, company cars, vans, fuel and private medical cover can no longer go on a P11D and must be payrolled instead. Other perks can stay on a P11D until April 2028. Loans and accommodation can stay on a P11D for the foreseeable future.

When does payrolling benefits in kind become mandatory?

On 6 April 2027 for company cars, car fuel, vans, van fuel and employer provided medical benefits. Most other perks follow on 6 April 2028. Loans to employees and living accommodation are not included in either phase and stay optional.

What does payrolling a benefit mean?

It means adding the value of a perk to an employee’s pay in your payroll software, so the tax on it is taken every payday, the same way as tax on salary. The details go to HMRC each time you run payroll, instead of on a P11D form after the tax year ends.

Will my employees pay more tax?

No. The amount of tax on their perks stays the same. What changes is the timing: it comes out of each payslip instead of being collected later through their tax code. In the first year, some people may feel they’re paying twice if they’re still paying off tax from previous years.

What happens to the P11D(b) and Class 1A National Insurance?

For company cars, vans, fuel and medical cover, the company’s Class 1A National Insurance is paid every payday through payroll from April 2027, not once a year on a P11D(b). Perks still reported on a P11D keep using the P11D(b). HMRC hasn’t yet confirmed how it works for perks payrolled by choice.

Is there a grace period for mistakes in 2027?

Partly. For the 2027/28 tax year, HMRC won’t charge penalties for inaccurate payrolling of perks unless the mistake is deliberate. Late filing and late payment penalties still apply as normal, so the easing only covers honest errors.

Do I still need to send P11Ds in July 2027?

Yes. P11Ds and the P11D(b) for the 2026/27 tax year are still due by 6 July 2027, with the Class 1A payment due by 22 July 2027. That’s on top of the Class 1A you’ll already be paying monthly on phase 1 perks from April 2027.

How do I register to payroll other benefits voluntarily?

Through HMRC’s online payrolling benefits service. The window for the 2027/28 tax year opens in November 2026 and closes on 5 April 2027. You need to register before the tax year starts, so if you miss it you’ll wait until the following year.

Does this apply to a director with a company car in their own limited company?

Yes, if the company provides the car and the director is paid through payroll. A company car is a phase 1 perk whoever drives it, so the tax on it will need to go through the company’s payroll from 6 April 2027.

How ChadSan can help

Our payroll team can check which of your perks are affected, make sure your payroll is set up and tested in time, write the note for your staff, and run your payroll every month so it keeps working after April. If you’d rather hand the whole thing over, we can get your business ready for April 2027 from start to finish.

Our payroll team works with businesses from our offices in South London, Essex, Guildford and Bristol, and clients right across the UK. You can also see our pricing before you get in touch.

Sources: HMRC, Draft guidance and legislation to aid preparation for reporting benefits in kind in real time (GOV.UK, updated 23 September 2026). HMRC, Getting ready for mandatory payrolling of benefits in kind (GOV.UK). Chartered Institute of Taxation, Employers: on your marks (1 April 2026). This guide is general information and not personal tax advice.