From 6 April 2027, payrolling certain benefits in kind becomes mandatory, phased in over two stages—phase 1 covers company cars, fuel, vans, and medical benefits, with most others following in April 2028.
If you’ve been keeping an eye on HMRC’s plans for benefits in kind (BiKs), you’ll know change is coming within the next year. The headline is simple: payrolling biks is becoming mandatory for certain benefits. But, it’s the detail that finance teams need to pay attention to because the timeline has shifted, and the way you record and report expenses will need to change accordingly.
This is a straightforward rundown of what’s changing and when.
What does mandatory payrolling biks mean for businesses?
Payrolling a benefit means you report the Income Tax due on it in real time, through payroll, rather than tidying it all up at year’s end through a P11D. For benefits like company cars or private medical cover, that tax gets spread across the year and collected as you go.
The two-phase timeline
Following industry feedback, HMRC has confirmed a phased introduction rather than a single switchover. Mandatory real-time reporting of Income Tax and Class 1A National Insurance contributions for certain benefits in kind and taxable expenses will now be phased in, with phase 1 commencing from 6 April 2027 and phase 2 from 6 April 2028.
From 6 April 2027, mandatory payrolling will cover company cars, car fuel, vans, van fuel, and employer-provided medical benefits. Phase 2 brings in most other benefits from April 2028, excluding loans and accommodation, which remain voluntary.
| Phase | Starts | Benefits covered |
| Phase 1 | 6 April 2027 | Company cars, car fuel, vans, van fuel, employer-provided medical benefits |
| Phase 2 | 6 April 2028 | Most remaining BiKs (loans and accommodation stay voluntary) |
The good news is that the phased rollout gives you extra time to prepare. However, don’t assume 2027 means you can wait; adjusting payroll systems takes planning, and implementation work typically begins well in advance.
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Why does this matter for expense management?
Payrolling BiKs isn’t only a payroll job, it leans heavily on the quality of your expense and benefit records. If your data is messy, real-time reporting will expose it fast.
How is reporting shifting?
HMRC is also tidying up the technical side. Draft data item guidance is being provided that reflects the removal of real-time information (RTI) data fields for BiKs. The technical specifications for developers will be updated to align with the revised data requirements from April 2027. In short, the way benefit data flows into payroll is being rebuilt, and your software will need to keep up with the pace.
A lot of finance managers don’t realise how much manual reconciliation is behind their current P11D process until they try doing it monthly instead of annually. Is your organisation still juggling benefit and expense data across separate tools? If so, now’s a sensible time to start closing those gaps.
Take HTS Group, for example. Their finance team was losing up to two days every month to manual reimbursements and reconciliations, with month-end closures constantly slipping.
After moving to Capture Expense—integrated directly with their Cintra People payroll and Sage 50—monthly expense processing dropped from a day and a half to an hour and a half, alongside an 87% reduction in errors. That’s the kind of clean, connected data that makes real-time reporting straightforward rather than stressful.
Read the full story here.
Are you ready for the payrolling bik deadline?
The 2027 deadline feels distant, but the organisations that handle this well will be the ones that tidied their data early rather than scrambling at year’s end. Real-time reporting rewards clean, connected data—and that’s exactly what good expense management gives you.
Capture Expense keeps spend, mileage, and reimbursement records in one place, with integrations that sync directly into your payroll and accounting systems; vehicle mileage tracking and card reconciliation that keep the underlying data accurate before it reaches payroll; and expense reporting that helps finance teams spot issues early. All of which matters when fuel and vehicle benefits are in scope for phase 1.
It’s worth checking the official details in HMRC’s interim guidance on payrolling biks, which will be regularly updated. Further technical guidance is expected by July 2026, with final phase 1 guidance aligned to the Autumn Budget 2026. Begin with your phase 1 benefits, check your records, and make sure your systems are ready to report in real time.
If you’d like to see how Capture Expense keeps your expense and benefit data clean and connected ahead of the change, we’d be happy to walk you through a demo.
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