P11D Changes: What employers need to know for 2026 and beyond

Your practical guide to the end of P11Ds and the shift to mandatory payrolling of benefits.

The UK is entering the biggest change to benefit‑in‑kind (BIK) reporting in over a decade. HMRC has confirmed that traditional P11D forms will be phased out, with most benefits being taxed in real time via payroll rather than through an annual form submission.

This shift supports HMRC’s wider modernisation programme, aiming to reduce paperwork, simplify administration and give employees a clearer view of their tax position throughout the year .

Here’s everything employers need to know.

What is changing?

1. Mandatory payrolling of benefits from April 2027
    HMRC will require all UK employers to payroll most benefits‑in‑kind (BIKs) from April 2027, replacing the historic P11D process .
   
   This means:
   - Benefits will be taxed as they are provided, through payroll
   - Employees will see BIK tax deductions on their payslips
   - Year‑end P11Ds will no longer be required for payrolled benefits
   
   This is a significant move away from retrospective reporting.

2. Voluntary registration for payrolling benefits ends 6th April 2026
   From 6 April 2026, employers will no longer be able to voluntarily register to payroll benefits - payrolling will become mandatory from April 2027.
   Changes to employer provided benefits policy and administration - GOV.UK
   
   This ensures the entire system will transition cleanly to real‑time reporting.

3. The P11D process is being phased out, but not instantly for every benefit
   HMRC has indicated some complex benefits may need longer to transition (e.g., accommodation, beneficial loans).
   
   However, the intention remains clear:
   - P11Ds for standard benefits will disappear. 
   

4. Paper P11D filing will only remain for ceased-trading employers
   From 6 April 2026, employers who have ceased trading mid‑year may still file paper P11Ds to finalise their affairs before year‑end.
   Changes to employer provided benefits policy and administration - GOV.UK
   
   Everyone else must use digital submissions.

5. 2024/25 and 2025/26 P11D obligations still apply
   Before the full transition:
   - Filing must be online. Paper forms are no longer accepted 
   
   Employers should continue reporting normally until mandated otherwise.
   

Why the P11D is changing 

According to government updates, the move toward real‑time payrolling is designed to:

• Improve accuracy of employee tax deductions
• Reduce year‑end corrections
• Simplify employer reporting
• Modernise outdated processes

It also reduces the confusion that many employees experience when P11D‑related tax adjustments hit their tax code months after receiving a benefit.

What these changes mean for employers 

More payroll-led complexity
Payroll teams will need to calculate benefit values accurately in real time - requiring updated systems, stronger controls and closer HR/finance alignment.

Cash-flow changes
Tax on benefits will be spread across the year, affecting both employers and employees.

Greater need for clear employee communication
Employees will now see tax on BIKs in their monthly net pay. Managing expectations and providing clarity will be essential.

Impact on benefit design
Some businesses may simplify benefits that are complex to administer or value under payrolling.

What Employers Should Do Now 

• Review all benefits currently reported on P11Ds
  

  Identify which can transition easily to payroll.

• Check payroll software capability
  Ensure systems support BIK payrolling and real‑time valuations. 
  

• Update internal processes
  Finance, HR and payroll will need shared workflows. 

• Communicate early with employees
  Prepare clear explanations for payslip changes.
  

• Plan for removal of voluntary payrolling
  Because the option disappears April 2026.
  

• Prepare for a full transition by April 2027
  Even if some benefits need bespoke handling.

How Burgess Hodgson Payroll team can support you

As a CIPP‑accredited payroll team, we guide employers through this transition by:

• Assessing which benefits should be payrolled
• Updating payroll processes for real‑time reporting
• Ensuring correct tax and Class 1A treatment
• Preparing final P11Ds during the transition years
• Supporting employee communication
• Providing expert guidance on complex BIKs (e.g., cars, accommodation, loans)

For support, contact our specialist payroll team:
contactpayroll@burgesshodgson.co.uk