Employer Reporting Rules 2027 – Taxable Benefits-in-Kind

Taxable benefits-in-kind come with important reporting obligations for UK employers. Whether payrolling benefits, using P11D forms, or settling liabilities through a PAYE Settlement Agreement (PSA), your reporting and payment duties depend on how the benefit is managed. With major changes set to take effect from April 2027, including mandatory payrolling, it’s essential for employers to prepare their payroll systems and compliance processes now.

Understanding Employer Responsibilities for Taxable Benefits-in-Kind

When an employer provides taxable benefits-in-kind—such as company cars, private medical insurance, or accommodation—they must either report these to HMRC and the employee or settle the liability on the employee’s behalf. These obligations fall under three main routes:

1. Payrolling the benefits through Real Time Information (RTI)
2. Reporting via form P11D
3. Using a PAYE Settlement Agreement (PSA)

Each route has its own rules for reporting, timing, NIC treatment, and employee communication.

Payrolling Benefits: Real-Time Tax Reporting

If an employer chooses to payroll benefits, they must register the benefit with HMRC before the start of the tax year. From that point, the benefit is added to the employee’s taxable pay during each payroll run and taxed through PAYE. This is submitted using RTI on the Full Payment Submission (FPS).

Payrolled benefits do not need to be included on the P11D form. However, employers must still report and pay Class 1A National Insurance Contributions (NICs) for payrolled benefits via Form P11D(b) after the end of the year.

Key Points:

• Registration must happen before the tax year starts.
• The taxable value is spread across the year, reducing the risk of underpayment.
• Class 1A NICs for payrolled benefits are reported and paid annually—until April 2027.

P11D Reporting for Non-Payrolled Benefits

If the employer doesn’t payroll a taxable benefit, it must be reported to HMRC via form P11D, and a copy must be provided to the employee. The employer must also submit form P11D(b) to declare and calculate Class 1A NICs due on all reportable benefits.

P11D Deadlines for the 2024/25 Tax Year:

• Submit P11D and P11D(b): by 6 July 2025
• Pay Class 1A NICs: by 22 July 2025 (electronic payments) or 18 July 2025 (by post)

These deadlines apply to all employers, regardless of whether they have only one employee. Employers who are issued a reminder must submit a nil return if no benefits were provided.

PAYE Settlement Agreement (PSA)

A PSA allows employers to pay the tax and NICs on behalf of their employees for certain benefits that are minor, irregular, or impractical to report individually—such as staff entertainment or small gifts.

PSA Process:

• Must be applied for and agreed with HMRC by 5 July 2025
• Employer pays the tax, grossed up to include the tax on the tax
• Class 1B NICs (13.8% for 2024/25) is due on both the benefit and tax
• Tax and NICs must be paid by 22 October 2025 (or 19 October by cheque)

Once a PSA is approved, it remains in effect each year until it is cancelled or amended.

Making Good on Benefits

If an employee reimburses the employer for part or all of the cost of a benefit, this can reduce the taxable value—but only if done by strict deadlines:

• 1 June 2025 for payrolled benefits
• 6 July 2025 for P11D-reported benefits

Missing these deadlines will mean the full value is taxable and reportable.

Informing Employees

Employers must inform employees about their benefits and how tax has been handled:

• For payrolled benefits, employees must be notified by 1 June 2025
• For P11D benefits, a copy of the P11D or equivalent details must be provided by 6 July 2025

Employees should be encouraged to check their PAYE tax codes and personal tax accounts to ensure their benefits have been handled correctly.

Big Changes from April 2027: Mandatory Payrolling

From 6 April 2027, payrolling of most taxable benefits-in-kind will become mandatory. This major change will affect how employers report and pay both income tax and Class 1A NICs:

• All reportable benefits (except for accommodation and interest-free/low-interest loans) must be payrolled
• Class 1A NICs will be calculated and reported through RTI each pay period
• The current annual P11D and P11D(b) process will become obsolete for most benefits

Accommodation and loans will remain outside mandatory payrolling in 2027 but may be voluntarily payrolled and could be brought into the system in the future.

What This Means:

• Employers must update their payroll systems to handle benefits through RTI
• Monthly payroll runs will include both tax and Class 1A NICs
• No year-end P11Ds or lump-sum NICs payments from July 2027 onward

Practical Steps for Employers

To prepare for the 2027 changes and ensure ongoing compliance:

1. Assess your current benefit reporting process
2. Register for voluntary payrolling for 2025/26 or 2026/27 to transition early
3. Ensure payroll software is RTI-compliant and can handle payrolled benefits
4. Train HR and payroll teams on new reporting duties and employee communication
5. Review PSA arrangements and cancel or update by 5 July if needed

Taking these steps now will minimize disruption and distribute the administrative load across multiple tax years. With the shift to mandatory payrolling from April 2027, employers will need to update their systems, review reporting practices, and train their teams early on. While this change alleviates year-end P11D burdens, it requires more accurate reporting throughout the year. At Tax Accountant, we assist businesses with benefit compliance, payroll reporting, and preparing for legislative changes. Contact us for help with payrolling setup, PSA eligibility, or accurate Class 1A NIC reporting.