Millions of UK workers and employers face a longer wait for a major tax reporting overhaul after HMRC confirmed it is delaying the full introduction of mandatory payrolling for benefits in kind.
The changes, originally due to apply across all employee benefits from April 2027, will now be introduced in phases.
The following benefits will move to the new system in 2027:
- company cars
- car fuel
- vans
- van fuel
- employer-provided medical benefits
Most other taxable benefits will not be included until April 2028.
The decision follows feedback from businesses and payroll providers, but tax experts have warned the staggered rollout could create confusion for employers and workers alike, with some benefits appearing differently on payslips while others remain under the old reporting system.
Caroline Harwood, Head of Employment Tax at BDO, described the move as a "half-way house solution", arguing that employers may now have to manage two separate systems and employees could struggle to understand changes to their tax codes and payslips.
HMRC says the phased approach will support a smoother transition and give businesses more time to prepare for one of the biggest changes to benefits taxation in years.
In its new guidance, it says: "HMRC has been engaging with industry experts to gather feedback ahead of 6 April 2027.
"Following feedback gathered from stakeholders, mandatory real-time reporting of Income Tax and Class 1A National Insurance contributions for certain benefits in kind (BiKs) and taxable expenses will now be phased in.
"Phase 1 will commence from 6 April 2027 and phase 2 will commence from 6 April 2028. This will support a smoother transition for businesses."
This guidance page will be updated with further technical guidance by next month.
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