This article summarises HMRC's confirmed timeline for mandatory payrolling of benefits in kind (BIK), the design decisions set out in HMRC's technical note, and the practical steps we recommend clients take now - including getting company cars and vans correctly reflected on the fixed asset/fleet register, which underpins accurate Phase 1 reporting.
Background
HMRC is moving the reporting and taxation of benefits in kind and certain taxable expenses from the annual P11D process to real-time reporting through payroll (via the Full Payment Submission, or FPS), in the same way that salary is currently reported. This is a long-standing modernisation programme; the effective date has moved more than once, most recently in an announcement on 15 June 2026.
On 15 June 2026, HMRC confirmed a phased approach rather than a single switchover for all benefits. Mandatory payrolling will now be introduced in two phases:
Phase 1 – from 6 April 2027: company cars, car fuel, vans, van fuel, and employer-provided medical and dental benefits.
Phase 2 – from 6 April 2028: most remaining benefits (e.g. non-cash vouchers, gym memberships, mobile phones outside the exemption, and other common BIKs).
Employment-related loans and living accommodation remain outside the mandatory regime for the time being. These can continue to be reported on a P11D, or payrolled voluntarily.
What HMRC's Technical Note Tells Us About the Design
Reporting moves from the annual P11D/P11D(b) to the FPS, with the number of RTI data fields expanded to align with what is currently captured on the P11D.
Both Income Tax and Class 1A National Insurance on in-scope benefits are reported and paid in real time, rather than being collected later through a tax code adjustment or year-end NIC payment.
Where the in-year value of a benefit isn't known (e.g. supplied by a third party), employers can use a reasonable estimate and correct it through a BIK "update" process, with all benefits reconciled by 6 July following the tax year.
A light-touch approach to inaccuracy penalties applies for the first year of mandation (2027/28) provided errors aren't deliberate; existing late filing/late payment penalties for RTI still apply. The full penalty and interest regime returns from 2028/29.
HMRC will publish further design detail during the rest of 2026 on outstanding areas: tax award schemes, third-party benefits, and the treatment of internationally mobile employees under modified payroll arrangements.
P11D and P11D(b) are not disappearing on one date - they continue for loans, accommodation, and (until Phase 2) most other benefits, so most employers will run a hybrid model for at least one tax year.
Priority Action: Get Cars and Vans onto the Asset Register Now
Company cars and vans are in the first wave of mandation (Phase 1, April 2027), so this is the area with the least lead time. Real-time reporting can only be as accurate as the underlying vehicle data feeding into it, so this should be treated as a data-quality project, not just a payroll configuration change.
Recommended Checks
Confirm every company car and van in active use is recorded on the fixed asset/fleet register - including recent acquisitions, leased vehicles, pool cars, and vehicles provided by salary sacrifice arrangements.
Reconcile the asset register against fleet/leasing provider records, insurance schedules, and P11D working papers to catch vehicles that exist in one system but not the other.
Ensure each vehicle record holds the data needed to calculate the benefit in real time: list price, CO2 emissions/electric range, fuel type, date first registered, availability dates, private fuel provision, and the employee to whom it is assigned (with start/end dates for changes mid-year).
Flag vehicles that qualify for special treatment (e.g. zero-emission vans, pool vehicles with no private use) so they are correctly excluded or reduced in the payroll feed.
Agree ownership: who updates the register when a vehicle changes hands, a lease starts/ends, or private use changes — this needs to happen in-year, not at year-end, once payrolling is mandatory.
Test the data flow from the asset register into payroll (COINS or third-party) well before April 2027, once HMRC's finalised software specifications are available.
Coins Development Roadmap
Coins payroll development to support Phase 1 mandatory payrolling is being delivered under feature FIN00000, targeted for completion in November 2026. This covers the FPS-based reporting changes needed for company cars, car fuel, vans, van fuel, and employer-provided medical/dental benefits.
This date is subject to change depending on further HMRC design updates - HMRC has yet to publish its final technical specifications for software developers (expected in the second half of 2026) and is still finalising design details on several related areas (e.g. treatment of underpayments, third-party benefits, and internationally mobile employees). We will confirm the release timeline and testing window with clients as soon as HMRC's final specification is issued and the Coins build is locked down.
Support and Guidance Available
Consultancy Guidance via Customer Support Desk (CSR Process)
Consultancy-Led Sessions through Service Catalogue
Comprehensive User Guide Availability (October 2026)
If you have any questions or require additional support, please contact our consultancy team via the Customer Support Desk.
Recommended Action Checklist
Action | Why it matters |
Audit all benefits provided and map each to Phase 1, Phase 2, or out-of-scope (loans/accommodation). | Determines what must be ready for April 2027 versus April 2028, and what stays on P11D. |
Reconcile the fixed asset / fleet register for cars and vans (see Section 3). | Cars and vans are Phase 1 — the shortest lead time — and reporting accuracy depends on clean vehicle data. |
Decide whether to voluntarily payroll Phase 2 or out-of-scope benefits ahead of mandation. | Avoids the transitional "double tax" effect in 2027/28, where a benefit is both taxed via an old tax code adjustment and newly payrolled in the same year. |
Confirm payroll/software readiness for FPS-based BIK and expense reporting. | The RTI return will carry more fields than today; systems and integrations need to support this before go-live. |
Model the Class 1A NIC and Income Tax cashflow impact for 2026/27 through 2028/29. | Tax moves from a year-end lump/adjustment to a real-time monthly cost — finance teams should forecast this. |
Register with HMRC by 5 April 2027 for any voluntary payrolling outside the mandatory Phase 1 scope. | Registration is not automatic and has a fixed deadline; missing it means staying on P11D for another cycle. |
Plan employee communications on payslip changes and the transitional take-home pay impact. | Employees may see tax on the same benefit collected twice in the transition year unless this is explained in advance. |
Keep P11D/P11D(b) processes running for benefits still out of scope. | P11D is not retired in one step — a hybrid reporting model is expected through at least 2027/28. |
Monitor HMRC's further guidance through the second half of 2026 (final specs, penalty/interest detail, edge cases). | Several design points (loans/accommodation timetable, internationally mobile employees, third-party benefits) are still to be confirmed. |
Sources
HMRC technical note: "Mandating the reporting of benefits in kind and expenses through payroll software – an update" (GOV.UK)
HMRC announcement of 15 June 2026 on phased implementation.
This article reflects publicly available guidance as of July 2026 and will be updated as HMRC publishes further detail.