Important changes to PAYE treatment of employee benefits – effective April 2027 and April 2028

HMRC are introducing the mandatory payrolling of taxable Benefits in Kind (BiKs) in two phases

• Phase 1 will be for company cars and fuel, vans and van fuel and private medical benefits.

Payrolling benefits means that employees will pay income tax in real time, rather than through an amended tax code the following year and employers will pay Class 1A national insurance contributions monthly, removing the lump sum payment in the following financial year.

• Phase 2 will be effective from April 2028 and will include all other benefits except, Employment‑related loans and employer‑provided living accommodation.

Further guidance, including employee‑specific information, will be shared as HMRC finalises the legislation during 2026.