On this page · 10 sections
- What changes on 6 April 2027, and what waits until 2028
- The dates between now and July 2028
- How the payroll calculation works
- The new FPS fields
- Payroll software fix list
- HR, fleet and benefits data fix list
- Worked example: 250 staff, 40 cars, 180 on medical cover
- Decision table: which route for each group of benefits
- How eCorpIT can help
- References
Summary. HMRC's guidance of 9 November 2026 confirms a narrow first phase. From 6 April 2027 UK employers must report five benefits on the Full Payment Submission (FPS): company cars, car fuel, vans, van fuel and employer-provided medical benefits such as private medical insurance, dental insurance and cash plans. Income Tax and Class 1A National Insurance on those benefits are then calculated and reported each payday, and payrolled benefits drop off the P11D and P11D(b). Most other benefits follow on 6 April 2028, while employment-related loans and living accommodation stay voluntary. Employers can payroll other benefits voluntarily in 2027-28 through an online service that reopened on 5 November 2026, but must register by 5 April 2027. Eligible globally mobile employees can be excepted through a form HMRC published the same day, with no backdating. The P46(Car) form goes on 5 April 2027. Two traps catch finance teams: a one-off double Class 1A cash outflow around July 2027, and a 50% cap on the tax any one pay packet can bear. HMRC will not charge inaccuracy penalties on 2027-28 payrolling errors unless they are deliberate. This is general information, not tax advice.
About this article. For payroll managers, finance directors, HR and HRIS owners, and payroll software teams at UK employers. On 13 November 2026 we checked every date, rule and worked figure against HMRC's guidance on GOV.UK, its interim guidance manual (updated 9 November 2026), the RTI technical specifications, the Budget 2026 rates annex and the UK Parliament bills record, and recomputed every sum. HMRC has still to publish its draft regulations and says the guidance will move into its main payrolling pages, so re-check before you change production payroll. This is not tax, payroll or legal advice. Researched with AI assistance and reviewed by our editorial team.
What changes on 6 April 2027, and what waits until 2028
HMRC announced the phased start in June 2026, and its November guidance sets out the two steps. In 2027-28 only cars, vans, the fuel for each and medical benefits are compulsory. From 2028-29 most other benefits join them. Valuation, making good and exemption rules do not change; only the reporting and collection route does.
The table draws on HMRC's main guidance, reporting requirements, Annex 2, and its pages on third-party providers and termination payments.
| Benefit | 2027-28 (from 6 April 2027) | From 6 April 2028 | If not payrolled |
|---|---|---|---|
| Company cars and car fuel | Mandatory on the FPS | Mandatory | P11D only for excepted globally mobile staff |
| Company vans and van fuel | Mandatory on the FPS | Mandatory | As above |
| Medical benefits (PMI, dental insurance, cash and health plans, employer-funded treatment) | Mandatory on the FPS | Mandatory | As above |
| Other taxable benefits and expenses | Voluntary, register by 5 April 2027 | Mandatory | P11D and P11D(b) by 6 July after the tax year |
| Employment-related loans | Voluntary only | Voluntary | P11D and P11D(b) |
| Living accommodation | Voluntary only | Voluntary, but associated living costs such as heating, lighting and furniture become mandatory | P11D and P11D(b) |
| Benefits under an approved taxed award scheme | Not payrolled by the employer | Not payrolled | Existing taxed award scheme reporting |
| Benefits provided as part of a termination payment | Do not have to be payrolled | Same | Existing rules |
Note the accommodation row: HMRC's Annex 2 keeps the accommodation benefit voluntary from April 2028, but separately taxable living costs that come with it, such as heating, lighting, maintenance, decorating and furniture, become mandatory then.
HMRC's definition of a medical benefit matters for the benefits platform. It covers private medical insurance, dental insurance, cash plans and health plans that reimburse medical or dental costs, and employer-funded treatment or healthcare services. It excludes exempt health screening and check-ups, exempt welfare counselling, workplace adjustments that let someone do their job, fully exempt benefits, and non-medical wellbeing perks such as gym memberships unless they are separately taxable as a medical benefit.
Paper processes shrink at the same time. Payrolled benefits drop off the P11D and P11D(b), and the P46(Car) form, postal and digital, cannot be used from 6 April 2027. HMRC will remove payrolled benefits from tax codes, while underpayments from earlier years keep being collected through tax codes as now.
Employers that already payroll voluntarily are not finished. For 2026-27, Class 1A on voluntarily payrolled benefits is still declared at year end on a P11D(b). From 6 April 2027 anything you payroll, mandatory or voluntary, carries Class 1A in real time on the FPS, so a working voluntary process still needs a software change. The voluntary service reopened for registrations and cancellations on 5 November 2026, and loans and accommodation can now be registered too.
The legal base is not final. HMRC says primary legislation follows the 2026 Finance Bill timetable, and draft regulations on scope, RTI data items, Class 1A reporting, corrections and the globally mobile carve-out will be added to its interim manual in December 2026. The Finance Bill had its Commons first reading on 3 November 2026, with second reading set for 23 November 2026.
The dates between now and July 2028
Sources: HMRC's delivery timeline, RTI specifications, exception and voluntary service pages, employer deadlines and PAYE payment rules.
| Date | What happens | Who acts |
|---|---|---|
| October 2026 | HMRC test service supports the 2027-28 RTI specifications | Payroll software developers |
| 5 November 2026 | Exception form for globally mobile employees published; voluntary payrolling service reopens | Employers |
| 9 November 2026 | Employer guidance published; interim manual updated | Everyone |
| December 2026 | Draft regulations due in HMRC's interim manual | Advisers, software vendors |
| March 2027 | Live RTI service for 2027-28 submissions | Payroll software developers |
| 5 April 2027 | Last day to register voluntary payrolling for 2027-28; HMRC's recommended date for exception notifications; P46(Car) withdrawn | Employers |
| 6 April 2027 | Mandatory payrolling of cars, vans, fuel and medical benefits starts | Employers, bureaux |
| 22 May 2027 | First monthly PAYE payment that includes real-time Class 1A (monthly payers) | Finance |
| 6 July 2027 | P11D, P11D(b) and employee copies due for 2026-27 | Employers |
| 22 July 2027 | Pay 2026-27 Class 1A (19 July by cheque), on top of real-time Class 1A already flowing | Finance |
| 6 April 2028 | Most other benefits mandatory, except loans and accommodation | Employers |
| 1 June 2028 | First annual payrolled benefits statements due to employees | Employers |
| 6 July 2028 | P11D and P11D(b) for any 2027-28 benefits that were not payrolled | Employers |
The globally mobile exception needs its own line in the project plan. HMRC's main guidance tells employers to apply by 5 April 2027, while its timeline calls that date a recommendation rather than a deadline and asks for notifications as soon as possible. The form page settles the practical point: the start date must be on or after the day you submit, and you keep payrolling until the exception starts. To keep someone off payrolling from day one, file before 6 April 2027.
How the payroll calculation works
Spreading the cash equivalent
For each benefit and each employee, payroll takes the annual cash equivalent, divides it by the number of pay periods in the tax year, rounds down to two decimal places and adds the result to taxable pay for each period. In HMRC's example, a monthly-paid employee with a £2,100 benefit has £175 added each month (£2,100 divided by 12), and Income Tax and Class 1A are worked out on that.
When a value changes mid-year, payroll recalculates the full-year figure, subtracts what has already been payrolled and spreads the balance over the remaining periods. In HMRC's four-weekly example, a £2,600 benefit becomes £2,800 after six of 13 periods; £1,200 has gone through (six periods of £200), so £1,600 is spread over the last seven. That stateful step is where spreadsheet processes break.
Class 1A at employee level
Class 1A sits in its own RTI field and has no link to the employee's National Insurance category letter. HMRC wants it calculated per employee per pay period, with a single rounding on the employee's total rather than on each benefit. In HMRC's weekly example, a £200.00 car benefit and a £38.71 medical benefit give £238.71; at 15% that is £35.8065, reported as £35.81. Rounding each benefit separately can give a different penny.
HMRC's examples use 15%, the Class 1A rate for 2026-27. HMRC's 2027-28 employer rates page was not yet published on 13 November 2026, but the Budget 2026 rates annex keeps the employer Class 1 rate at 15% for 2027-28.
The 50% overriding limit
Payroll must not deduct more than 50% of an employee's pay in tax in a period, and for this test pay excludes the value of payrolled benefits. As an illustration, if tax due in a month were £900 on cash pay of £1,500, payroll could take only £750 (50% of £1,500) and carry £150 forward to later periods where possible. Anything still uncollected at year end goes to HMRC's P800 reconciliation or a Simple Assessment, or through Self Assessment if the employee is registered. HMRC flags the people most likely to hit the cap: leavers, staff on long-term sick leave or statutory pay, and directors with low or no salary. You must keep reporting the full benefit value even when a tax backlog builds.
Estimates, making good and corrections
If a value is not known at the start of the year, HMRC accepts a reasonable estimate, such as last year's figure for a comparable benefit or the provider's estimated final figure, applied consistently across similar employees. It names peppercorn values like £1 or £0.01, unevidenced round numbers and non-reporting as inaccurate. Late information can go on the next FPS, and values can be updated at any point in the year.
Making good reduces the payrolled amount: if an employee is expected to repay £400 of a £1,000 benefit, payroll £600 across the year. Making good does not apply to car and van benefit charges, which have their own employee contribution rules. If an employee makes good after the year ends, the fix is an amended month 12 FPS with corrected year-to-date figures. Records of benefits, contributions and correspondence must be kept for three years from the end of the tax year.
The new FPS fields
Annex 4 of HMRC's interim manual lists the data items added to the FPS from April 2027, and the RTI data item guide for 2027 to 2028 (version 1.1, added on 6 October 2026) carries the detail. You complete only the sections for benefits you provide.
| FPS section | Fields | Usual system of record |
|---|---|---|
| Type F, cars and car fuel | Make and model, date first registered, CO2 emissions, zero-emission mileage, fuel type, car identifier, amendment indicator, calculated price, accessories not in the price, employee capital contribution, employee payment for private use, available from and to dates, cash equivalent, engine size, free fuel dates, fuel cash equivalent, plus pay-period and year-to-date totals for cars and fuel | Fleet or leasing system; HRMS asset record |
| Type G, vans and van fuel | Pay-period and year-to-date totals for vans and for van fuel | Fleet system |
| Type I, medical | Cost to employer or amount forgone; pay-period and year-to-date totals | Insurer or benefits platform |
| Other payrolled benefits | Pay-period and year-to-date totals | Benefits platform, finance |
| Class 1A on payrolled benefits | Amount due in period, year to date, adjustment in period, adjustment year to date | Payroll engine |
The car section is the heavy one. A fleet record holding a registration and lease end date is not enough: payroll needs list price, accessories, CO2, zero-emission mileage, fuel type and exact availability dates before the cut-off for the period in which a car changes hands. More fields arrive in April 2028 for the newly mandated benefits, so schema work done now will be extended, not replaced.
Payroll software fix list
These items apply to payroll software vendors, bureaux and in-house teams. HMRC's free Basic PAYE Tools is being updated with PAYE, Class 1 and Class 1A calculations for benefits and payslip display, a useful baseline to test against.
- Adopt the 2027-28 RTI schema. Build to RTI RIM 2028 v2.0 and data item guide v1.1, test in HMRC's test service now, and go live when the live service opens in March 2027.
- Model benefits as records, not pay codes. Type (F, G, I or other), annual cash equivalent, start and end dates, source reference and change history.
- Build the spreading engine. Weekly, two-weekly, four-weekly and monthly periods, round down to two decimals, and recalculate the remaining spread on any change.
- Calculate Class 1A per employee per period. One rounding on the total, separate from Class 1 category letters, with the four new fields including adjustments.
- Apply the 50% overriding limit. Test against cash pay excluding benefits and keep a carry-forward ledger the employee can see.
- Handle starters, leavers and changes. End dates stop the spread; late notices go on the next FPS, not at year end.
- Support corrections. In-year adjustments go in the next period; post-year changes such as late making good need an amended month 12 FPS.
- Keep a P11D route. Loans, accommodation, unregistered benefits and excepted employees still need P11D and P11D(b) output.
- Flag exceptions per employee. An exception covers all of that person's benefits, starts no earlier than submission and ends only on 5 April.
- Generate the annual payrolled benefits statement. Due by 1 June; each payrolled benefit with its value and cash equivalent, plus amounts under optional remuneration arrangements. P60s and P45s do not change.
- Show benefits on payslips. Employer and employee should both see what was payrolled and what is due.
- Accept structured imports. HMRC asks providers for machine-readable data, at least .xlsx or .csv rather than PDF; validate identifiers, duplicates and gaps on import.
- Retire P46(Car) logic. Any route that reports car changes outside payroll stops on 5 April 2027.
- Keep the audit trail. Source, estimate basis and change history for every value, for at least three years.
HR, fleet and benefits data fix list
Most first-year failures will be late or mismatched data, not calculation errors. HMRC tells employers to map how benefit information reaches payroll, agree cut-offs with fleet and fuel suppliers, and decide how starters, leavers, car swaps, flexible benefits and salary sacrifice are handled. Fleet companies, insurers, voucher platforms and relocation providers are not being made reporters, but employers depend on their data arriving complete, timely, traceable and machine-readable.
| Data item | Usual owner | What payroll needs before each cut-off |
|---|---|---|
| Car allocation, list price, CO2, fuel type, availability dates | Fleet provider or fleet manager | New, swapped and returned cars, with exact dates |
| Free fuel start and withdrawal | Fuel card provider, HR | Dates and confirmation of private fuel |
| Medical cover start, end and cost per head | Insurer, broker, benefits platform | Joiner and leaver changes, cost or amount forgone |
| Employee contributions and private-use payments | Payroll, HR | Amounts and dates, to reduce the cash equivalent |
| Optional remuneration (salary sacrifice) | Benefits platform | Amounts forgone, for the annual statement |
| Secondees and group-provided benefits | HR, group payroll | Which entity's PAYE scheme reports the benefit |
| Globally mobile status | Mobility team, HR | Whether an exception applies and from when |
For an HRMS team that means four things. Hold one benefit register keyed on payroll ID and National Insurance number so provider files match. Publish a cut-off calendar every provider signs up to. Trigger benefit events from HR workflows (joiner, leaver, car change, cover change) instead of month-end spreadsheets. And brief employees early: HMRC supplies sample wording, asks employers not to describe the change as taxing people twice, and warns that some staff will pay current-year benefit tax through payroll while still repaying an older underpayment through their tax code. The same values feed pay gap reporting under the EU pay transparency directive.
April 2027 is crowded: see our Employment Rights Act 2027 dates guide, our IR35 size thresholds piece and the 2027 US and UK compliance calendar.
Worked example: 250 staff, 40 cars, 180 on medical cover
Take an illustrative UK employer with 250 staff on a monthly payroll. Forty have company cars with an average annual cash equivalent of £6,000 and no free fuel. One hundred and eighty have private medical insurance costing £1,200 a head. The figures only show the mechanics and assume Class 1A stays at 15% for 2027-28.
Per employee. A manager with both benefits has £500 (car, £6,000 divided by 12) plus £100 (medical, £1,200 divided by 12) added to taxable pay each month. As a higher-rate taxpayer in England, paying 40% in 2027-28, that is £240 a month of tax collected through payroll instead of through a reduced tax code. Annual tax is unchanged, and HMRC says employees will not pay more tax because of the switch. The employer's Class 1A on that manager is £600 × 15% = £90.00 a month.
For the company. Benefit values total 40 × £6,000 = £240,000 for cars and 180 × £1,200 = £216,000 for medical cover, so £456,000 a year. Class 1A at 15% is £68,400 a year, or £5,700 a month reported on the FPS and paid with the monthly PAYE bill, which is due by the 22nd of the next tax month.
The cash-flow overlap. The 2026-27 Class 1A of £68,400 is still declared on the P11D(b) by 6 July 2027 and paid by 22 July 2027. The same day, the PAYE payment for the third tax month (6 June to 5 July) falls due, so three months of real-time Class 1A, 3 × £5,700 = £17,100, will have been paid by then. Across the 2027-28 tax year the company pays £68,400 plus 12 × £5,700, or £136,800 of Class 1A, double a normal year with the same benefits. HMRC calls this a one-off overlap and tells employers to budget for it.
The penalty position. A car swap that reaches payroll a month late is corrected on the next FPS, and HMRC will not charge 2027-28 inaccuracy penalties without evidence of deliberate non-compliance. Late filing and payment penalties still apply. A late P11D(b) still costs £100 per 50 employees for each month or part month.
Decision table: which route for each group of benefits
The routes follow HMRC's registration guidance, Annex 2, the exception form and the taxed award scheme rules.
| If you... | Route for 2027-28 | Why |
|---|---|---|
| Provide cars, vans, fuel or medical cover | Payroll them from 6 April 2027 | Mandatory; no registration needed |
| Already payroll voluntarily | Keep payrolling and switch Class 1A to real time | P11D(b) no longer covers payrolled benefits |
| Provide other taxable benefits | Consider registering by 5 April 2027 to payroll them voluntarily | A one-year rehearsal before most become mandatory in April 2028 |
| Provide employment-related loans or accommodation | Keep the P11D unless one process matters more to you | Not mandated; voluntary payrolling allowed |
| Employ staff who work across borders and lack timely benefit data | Apply for an exception before their start date | All their benefits stay on the P11D; no backdating |
| Rely on a third party under a taxed award scheme | Leave it with the scheme | HMRC says do not report the same benefit through payroll |
How eCorpIT can help
eCorpIT is a Gurugram-based technology organisation, founded in 2021, assessed at CMMI Level 5 and MSME certified, with senior-led engineering teams working across AWS, Microsoft and Google platforms. Our HR tech and HRMS services team builds benefit registers, validated provider data feeds, cut-off workflows and reconciliation reports between fleet, benefits, HR and payroll systems. Talk to us at /contact-us/.
Last updated: 13 November 2026.
