Starting in April 2027, employers will be required to process all benefit in kind values through the payroll in real time, except for accommodation and loan benefits which can still be reported via Form P11D or included in payroll on a voluntary basis. That means that the P11D process will no longer apply to most benefits in kind. For any employer that currently provides benefits in kind, this is a significant change – fundamentally altering how you report, track and manage employee benefits. HMRC draft guidance to aid preparation was published alongside Autumn Budget 2025.
What’s changing?
What does that mean in practice?
Employers will need to reassess their processes and controls in respect of how benefits in kind are captured and reported. This will include the following actions:
- Updating payroll and related systems to capture the greater level of benefit details required under the new mandatory regime;
- Updating data collection processes to ensure they can provide accurate benefit details in real time;
- Engagement with key stakeholders such as payroll and benefit providers to update service level requirements and deliverables;
- Updating cash flow forecasts to account for the move to real time Class 1A NIC collection; and
- Understanding the tax risk – notwithstanding the soft approach to penalties in the first year, the new regime does pull benefits into the PAYE penalty regime, and failure to manage the process appropriately carries increased risk.
What can you do to prepare?
In preparation for April 2027, the following key tasks should be carried out:
- Assess your capabilities. The first step is to start reviewing your systems and processes. Even if you are currently payrolling benefits voluntarily, the draft HMRC guidance makes clear that the mandatory regime is different and requires much more detail to be collated and reported. This will require engagement across various internal and external stakeholders and service providers, and a testing plan to ensure the business is ready for April 2027 go-live;
- Identify complex cases. HMRC guidance is still in draft format, and we expect updates throughout 2026. But it acknowledges that a P11D process may need to be retained for certain ‘exception cases’. No further details on what will be considered an exception case have been provided at this stage, but HMRC make clear that penalties will apply if this route is not used as intended. Cases such as expatriate employees may fall into this category, and employers should identify any complex cases which they think may still require P11D reporting; and
- Think about the impact on employees. Employees will likely see changes to their tax codes and/or payslips, meaning a communication plan for employees is important. Proactive communication should reduce the number of queries and improve the employee experience.
How KPMG can help
Our employment tax team is currently working with employers in various sectors to prepare their benefits and payroll processes for real time reporting, including developing technology to support this change.
Please contact the authors, or your usual KPMG in the UK contact, to talk through how we can support your preparations. You can also join us at noon on Wednesday 25 February 2026 for a practical, insight driven session to help you understand what the new requirements mean in practice and (an ‘on demand’ recording of this event will be available afterwards).
For further information please contact: