Company cars and health cover: payrolling becomes compulsory from April 2027
This post contains affiliate links, marked with an asterisk (*). If you sign up through one, Benefit Holdings may earn a commission at no extra cost to you. It doesn't change what we say.
If your company provides benefits such as company cars or private medical cover, the way you report them is changing. From 6 April 2027, they have to be reported and taxed through payroll each month, instead of on a P11D after the end of the tax year.
What changes and when
- From 6 April 2027: company cars, car fuel, vans, van fuel and employer-provided medical benefits.
- From 6 April 2028: most other benefits in kind. Employment-related loans and living accommodation stay voluntary.
This applies to directors as well as employees, so it affects many small owner-managed companies.
What to do now
- List the benefits your company provides and who gets them.
- Check your payroll software can handle payrolled benefits. Most cloud packages, including payroll in Xero*, QuickBooks* and Sage*, already let you payroll benefits voluntarily, so you can switch over early.
- Tell staff their tax will be collected monthly through payroll rather than through a tax code adjustment.
- Watch for HMRC's final guidance, expected alongside the Autumn Budget.
Need someone to keep on top of this for you?I work as a part-time finance manager for small limited companies, usually one day a week.Book a free call
General information only, not professional advice. Correct as at the date shown; rules change, so check GOV.UK or with an accountant before acting.