HMRC has delayed mandatory payrolling of benefits in kind by a year to April 2027, giving employers and software providers more time to prepare. Penalties will be eased in the first year.

The requirement to report Income Tax and Class 1A National Insurance Contributions for most BiKs and expenses through Real Time Information (RTI) will now begin from 6 April 2027, rather than 6 April 2026 as previously announced.

From April 2027, employers will report BiKs and expenses via the Full Payment Submission (FPS), aligning with the method currently used for reporting salaries. The number of RTI fields will be expanded to reflect the data currently captured through P11D and P11D(b) forms.

The deferral is intended to give payroll professionals, software providers, tax agents and others additional time to prepare for the transition. From April 2027, employers will also have the option to payroll employment-related loans and accommodation on a voluntary basis.

To support a smooth rollout, HMRC will waive penalties for inaccuracies related to mandatory payrolling for 2027–28, provided there is no evidence of deliberate non-compliance. However, existing late filing, late payment penalties, and interest will continue to apply.

HMRC has confirmed that its Basic PAYE Tools software will also be updated to support payrolling of benefits in kind from April 2027.

The government has scrapped plans for detailed PAYE reporting of employee hours from April 2026, citing concerns over cost, complexity, and practicality. Employers will stick with current rules.

As part of the Spring 2025 Tax Update: Simplification, Administration and Reform summary, the government confirmed that it will no longer proceed with the previous governments plans to mandate more detailed reporting of employee working hours through Pay As You Earn (PAYE) Real Time Information (RTI) submissions. 

Under the original proposals, employers would have been required to submit significantly more detailed employee hours data on the hours worked by each employee via RTI returns from 6 April 2026. These proposals were reflected in the draft Income Tax (Pay As You Earn) (Amendment) Regulations 2025, which were expected to formalise the changes in law. However, the government has now announced that it will not take these draft regulations forward, effectively shelving the proposed reforms.

The enhanced reporting requirements would have meant employers providing detailed data on actual hours worked per pay period, as opposed to the current obligation to report an employee’s normal working hours. Significant concerns were raised by employers, payroll providers, and representative bodies regarding the complexity, cost, and practicality of these changes. 

Employers will therefore continue to report normal hours worked using the existing RTI framework, without the need to supply more detailed information.