A guide to reporting employee benefits and expenses
From April 2027, certain benefits provided to directors or employees must be reported as Payrolling Benefits in Kind (PBiK), while others, for the time being, remain reportable only on a form P11D.
This distinction affects how benefits like medical insurance, company vehicles, and loans are reported to HMRC for tax purposes.
Benefits that must be reported as PBiK from April 2027
Benefit:
Private medical insurance, including dental cover
What this covers:
Provision of private medical and/or dental insurance
Benefit:
Company cars and private fuel, including EV schemes and leased vehicles
What this covers:
Provision of a company car and fuel for private use by the individual or a member of their family or household
Benefit:
Company vans and private fuel
What this covers:
Provision of a van for use by the individual or a member of their family or household
Benefits that can be reported on a P11D or PBiK. For PBiK, these benefits must registered with HMRC before the start of the new tax year. A P11D(b) is still required for the Class 1A NIC
Benefit:
Phones
What this covers:
Apart from any mobile phone owned by the business, employer costs relating to mobiles, home phone, or any other phone the individual could use for private purposes
Benefit:
Professional subscriptions
What this covers:
Costs paid by the employer for subscriptions to clubs or other organisations which the individual was a member of
A P11D arises where the subscription is not to an HMRC (List 3) approved professional body or the membership is primarily personal rather than work-related
Benefit:
Credit cards
What this covers:
Use of a company credit card by the individual to pay for items not already reported above or personal use and not reimbursed to the business
Benefit:
Other benefits, expenses or irregular items
What this covers:
Other benefits or expenses that may need to be reported, including: gifts or loans of assets; goods or services at below market value; nursery or crèche services; general expense allowances; vouchers; relocation expenses; settlement of debts; other non-business expenses
Other benefits that remain outside mandatory payrolling, but may be voluntarily payrolled. A P11D will most likely be required too
Benefit:
Living accommodation
What this covers:
Living accommodation provided by the employer to the individual, or any member of their family
Benefit:
Beneficial Loans
What this covers:
A beneficial loan or advance to the employee of more than £10,000 at any point during the tax year, including director’s loan accounts
Next steps
Employers should review their benefits processes ahead of April 2027, including:
- Which benefits are currently reported through payroll
- Which are still reported on P11D forms
- Whether payroll software can deal with the relevant benefit values
- Whether employee communications need to be issued
It is also sensible to check ownership between payroll, finance, HR and tax teams so that responsibilities are clear before the first mandatory payrolling cycle begins.
The move to mandatory payrolling affects how the income tax is collected, but employers will still need to consider the associated Class 1A National Insurance position. In many cases, Class 1A NICs will continue to be reported and paid through the annual P11D(b) process unless and until HMRC confirm a different reporting route for the relevant benefit.
How BKL can help
If you have any questions about the upcoming changes to benefits reporting or would like support reviewing your current P11D and payrolling processes, get in touch with BKL.
Our specialists in employment taxes and payroll can help you assess which benefits are affected, identify any practical payroll or reporting issues, and prepare for the move to mandatory payrolling from April 2027.
