P11D Payrolling Delay Announced – What Employers Need to Know

In a recent Written Ministerial Statement, James Murray, the Exchequer Secretary to the Treasury, outlined 39 new measures aimed at simplifying and modernising the UK tax system. Designed to reduce the administrative burden on employers and small businesses, the package includes reforms to both tax processes and HMRC systems.

Among the most notable announcements is the delay to the mandatory payrolling of benefits in kind (BIK). Originally due to take effect from April 2026, the government has now extended the deadline by 12 months, giving employers until April 2027 to prepare.

What Is Payrolling of Benefits?

Payrolling benefits allows employers to report and deduct tax on employee benefits – such as company cars, health insurance or gym memberships – in real-time through the payroll, rather than via an annual P11D form. While the scheme is currently voluntary, HMRC has signalled its intention to make payrolling compulsory in the near future.

The shift aims to improve transparency for employees, reduce the number of end-of-year tax adjustments, and streamline the reporting process for businesses. However, the original timeline had raised concerns among employers about implementation readiness, particularly in terms of updating payroll systems and internal procedures.

Why the Delay?

The government’s decision to push back the go-live date to April 2027 has been broadly welcomed by employers and industry bodies alike. The additional time provides breathing room for businesses to adapt to the new system, ensuring they have adequate software support and internal resources in place before payrolling becomes a statutory requirement.

What Should Employers Do Now?

Despite the delay, the direction of travel is clear. Employers are encouraged to begin preparations early, especially if they have yet to explore payrolling benefits voluntarily. Key steps include:

·      Reviewing current employee benefits and how they are reported

·      Assessing payroll software compatibility with payrolling of BIK

·      Training HR and payroll teams on new reporting requirements

·      Seeking professional advice to ensure a smooth transition

Looking Ahead

The deferral of the payrolling deadline forms part of a wider HMRC initiative to digitise and modernise tax administration. With more changes on the horizon, including efforts to simplify Income Tax Self-Assessment and digitise business records, staying ahead of compliance will be vital.

At SJC Chartered Accountants, we’re here to support businesses through these changes. Whether you're looking to adopt payrolling now or want to future-proof your processes ahead of 2027, our team can guide you throug