Voluntary payrolling of benefits and how to prepare for mandatory payroll rules in April 2027
Payrolling benefits in 2026/27: why “voluntary’ now is the smartest way to get ready for mandatory payroll changes in April 2027.
A big shift is coming in how UK employers report and tax benefits in kind (BIKs). From April 2027, most taxable benefits and employment expenses will need to be reported through payroll in real time rather than via year-end P11Ds.
This might feel a long way off, but there is an important stepping stone:
• Voluntary payrolling for the 2026/27 tax year starts on 6 April 2026 (the tax year start) and
• The practical deadline to register is 5 April 2026. (You must register before the tax year begins).
If you are considering payrolling benefits from 2026/27, the window is closing and it can be a useful time to prepare, ahead of the mandatory switch in 2027.
What “voluntary payrolling” means for 2026/27
Under the current (voluntary) regime, you can choose to tax certain benefits through payroll, so employees pay the tax in year, rather than via later tax code adjustments.
The key points for 2026/27 are:
• You must register before the start of the tax year (so by 5 April 2026, for 2026/27). If you miss it, you generally can’t start until the following tax year.
• You can payroll benefits, but not:
o Employer-provided living accommodation
o Beneficial loans (interest-free/low interest)
• HMRC’s interim guidance on the mandatory regime also flags that after 5 April 2026, the current voluntary registration service won’t be available (except from separate future arrangements around loans/accommodation).
So if you want to trial payrolling most benefits in 2026/27, the decision (and registration) needs to happen now.
Mandatory payrolling of benefits
From 6 April 2027, HMRC’s direction of travel is clear. BiKs and taxable employment expenses move into real-time payroll reporting, via the Full Payment Submission (FPS).
Some headlines employers should plan around are:
• No registration will be needed for mandatory payrolling from April 2027 – as it will become the default.
• HMRC specifically highlights a cash-flow overlap risk. In July 2027, many employers may still be paying Class 1A NIC for 2026/27 under the old process while also starting real-time Class 1A for 2027/28 benefits – effectively two Class 1A bills in one financial year.
What should businesses be doing to prepare?
Preparation should begin with a thorough review of all benefits currently provided. Employers need a clear inventory of what is offered, how each benefit is valued, where the data originates, and how frequently it becomes available. This exercise alone often highlights gaps in ownership or inconsistencies in approach.
The next question is whether to use 2026/27 as a voluntary trial year. For many organisations, the answer will be yes. Registering before 5 April 2026 allows a full tax year to embed processes and train teams ahead of the April 2027 mandate. Even businesses that choose not to formally payroll in 2026/27 can still use the year to shadow-run calculations and test reporting internally.
It is equally important to align payroll calendars with benefit data timelines. Some benefits are straightforward and predictable, while others depend on third-party reporting or year-end adjustments. Businesses should agree how estimates will be handled, how corrections will be processed, and who is accountable for ensuring information reaches payroll on time.
Finance teams should also model the potential Class 1A NIC overlap in 2027 to understand the cash-flow implications and factor this into budgeting.
Above all, communication plans should be developed early. Explaining the change before it appears on payslips will reduce confusion and build confidence in the new system.
The bottom line
Mandatory payrolling of benefits from April 2027 is more than an administrative tweak. It represents a structural change in how benefits are taxed and reported, moving from an annual compliance exercise to an integrated, real-time payroll responsibility.
The 2026/27 tax year presents a valuable opportunity. Businesses that use it to test systems, refine processes and educate employees will enter April 2027 with confidence. Those that wait risk implementing new systems, changing processes and responding to employee concerns all at once under a hard deadline.
With April 2026 approaching, now is the time to decide whether voluntary payrolling will form part of your transition strategy and to begin preparing for a future where benefits sit firmly within payroll, not at the end of the tax year.
Don’t leave preparation until the deadline looms
If you’d like to review your benefits strategy, assess whether voluntary payrolling in 2026/27 is right for your business, or understand how mandatory payrolling will impact your payroll processes and cash flow, our payroll team are here to help.
Get in touch with us today to start planning for the April 2027 mandatory deadline.