P11D is Changing

What employers need to know before benefits move to payroll.

The P11D has been the way employers report staff benefits for years. That is about to change. From April 2027, most benefits will be taxed through payroll in real time, and the annual P11D will fall away for all but a couple of items. If you provide company cars, medical cover or other perks, now is the time to get ready. Here is what is happening, when, and what to do about it.

The headline:-

Mandatory payrolling of benefits starts on 6 April 2027. From that point, most benefits-in-kind go through payroll as they are provided, not on a P11D once a year. The 2026/27 return, due by 6 July 2027, is the last P11D most employers will file the traditional way.

A Quick Reminder: What a P11d is

A P11D is the form an employer uses to tell HMRC about benefits and expenses given to a director or employee that were not put through payroll. These are benefits in kind, or BiK. Think company cars, private medical cover, or a loan. You file one per person who received reportable benefits.

Alongside it sits the P11D(b). That is your declaration of the employer National Insurance due on those benefits, known as Class 1A. For 2025/26 the Class 1A rate is 15% of the total benefit value.

What Counts As A Benefit

Here is what goes on a P11D and what does not. The exempt list is not exhaustive, so check anything unusual before you assume it is off the hook.

Included (goes on P11d)	Not included (exempt)
Company cars	Trivial benefits of £50 or less, not cash or vouchers and not a reward for work
Private fuel provided for a company car	Employer pension contributions
Private medical and dental insurance	Business expenses reimbursed within HMRC's allowable rates, such as approved mileage
Interest-free or low-interest loans over £10,000 outstanding	One mobile phone per employee
Living accommodation provided to staff	Workplace parking
Gym memberships and similar perks	Work-related training
Non-business travel and entertainment paid by the company	Anything taxed though payroll

From 6 April 2027, most of the items in the left column move to payroll rather than the P11D. Only living accommodation and beneficial loans stay on the form.

What Is Changing, And When

This is the part to plan for. The move to payroll happens in stages:

Tax year	What happens
2025/26 (ended 5 April 2026)	Business as usual. File your P11D and P11D(b) by 6 July 2026. Pay Class 1A National Insurance by 22 July.
2026/27 (ends 5 April 2027)	The last P11D year for most benefits. You report as normal, with the return due by 6 July 2027.
From 6 April 2027	Mandatory payrolling begins. Most benefits are taxed through payroll in real time, in the period they are given. No annual P11D for those benefits.

Two things to hold onto:

1.   Two benefits stay on the P11D. Living accommodation and beneficial loans are carved out for now and will still be reported the old way until HMRC says otherwise.

2.   The P11D(b) does not vanish. You will still declare and pay Class 1A National Insurance each year until HMRC moves that into real time too.

What Payrolling Means For You And Your Staff

Instead of reporting a benefit once a year, you add its value to the employee’s pay each pay period and tax it there and then. For staff, the tax on their perks comes out as they go, rather than through a tax code change later. Their take home pay will look different, so it is worth telling them before it happens rather than after.

You can choose to start payrolling voluntarily before it becomes compulsory. You have to register with HMRC before the tax year begins, so it is a decision to make early rather than leave to the last minute.

What To Do Now

1.     List every benefit you provide and who receives it.

2.     Check your payroll software is ready to handle payrolled benefits.

3.     Decide whether to start voluntarily before April 2027, and register in good time if you do.

4.     Warn affected staff that their payslips will change.

5.     Keep filing as normal for 2025/26 and 2026/27 in the meantime.

Under the new system, reporting changes to your payroll provider quickly matters more than ever. If a change is missed or sent late, the employee ends up taxed incorrectly. Put a simple routine in place so every change is flagged and reported the moment it happens.

How We Can Help

This is a real change in how benefits are taxed, and the smoothest transitions will be the ones planned early. We can review the benefits you offer, get your payroll ready, handle this year’s filing, and map out your move to payrolling so nothing slips. We take a joined up view of your business, so we will flag anything else worth sorting while we are in there.