HM Revenue and Customs (HMRC) has announced a delay and phased implementation for the mandatory real-time reporting of income tax and Class 1A National Insurance contributions (NICs) on specified benefits in kind (BiKs) and taxable expenses. Originally planned as a single, comprehensive rollout, the new system will now begin in stages starting 6 April 2027.
The first phase will focus exclusively on motoring expenses and medical benefits, with 94 other categories removed from the initial launch. This significant scaling back marks a shift from HMRC’s earlier plan, which aimed to cover nearly all benefits in kind immediately.
Caroline Harwood, head of employment tax at BDO, commented on the changes: “Mandatory payrolling of company cars, car fuel, vans, van fuel, and employer-provided medical benefits will now begin in April 2027, while most other benefits in kind will be phased in starting April 2028.”
She added, “This staggered approach will increase pressure on employers, who will need to manage two parallel systems for reporting. It’s likely to cause confusion among taxpayers, as some benefits will affect payslips and tax codes sooner than others.”
Harwood also suggested that HMRC might consider postponing the entire scheme until they are ready to implement payrolling for all benefits in kind simultaneously to avoid unnecessary complexity.
In official communications, HMRC stated that updated technical specifications and guidelines will be provided well in advance. Details for Phase 1 will be shared in autumn 2026, with interim guidance for employers, payroll professionals, software providers, and tax agents scheduled for publication on GOV.UK in July 2026.
HMRC acknowledged that some software developers may already have begun adapting to the previous plan but emphasized that the phased approach was developed in consultation with industry stakeholders to better meet wider needs. The tax authority also encouraged developers to provide technical feedback and reach out via the HMRC Developer Hub for any questions or clarifications.