HMRC opens registration for voluntary payrolling of benefits that are outside of Phase 1 of mandatory payrolling.
HMRC has reopened its online service for employers who wish to voluntarily payroll benefits in kind and expenses that do not fall within Phase 1 of mandatory payrolling. This gives employers the opportunity to now voluntarily register to payroll other (non-Phase 1) taxable benefits for the 2027/28 tax year, and for many this will be an important decision to make ahead of 6 April 2027.
The announcement follows HMRC’s decision to phase in mandatory payrolling of benefits. Phase 1, which applies from 6 April 2027, covers company cars, car fuel, vans, van fuel and employer-provided medical benefits. Most other benefits will follow in Phase 2 from 6 April 2028, with employment-related loans and accommodation remaining voluntary for now. The reopening of the registration facility gives employers a route to bring other benefits into payroll earlier than required, should they wish to do so.
What has HMRC confirmed?
Employers can use HMRC’s payrolling benefits and expenses online service to register to voluntarily payroll benefits in kind and expenses for the 2027/28 tax year. Through the service, employers can:
- Register to voluntarily payroll benefits and expenses for the next tax year;
- Cancel an existing registration;
- View the benefits registered for voluntary payrolling in the current tax year; and
- View, and exclude, employees from a payrolled benefit for the current tax year.
Where Phase 1 benefits are provided, no registration is needed and these must be reported through payroll software from 6 April 2027.
Registration deadline
Employers must register before the start of the tax year in which they want to payroll the benefit. For 2027/28, registration must therefore be completed before 6 April 2027. The way benefits and expenses are reported cannot be changed part-way through a tax year, so an employer who misses the deadline they will have to wait until April 2028.
Once an employer has registered, HMRC will adjust the tax codes of employees receiving the payrolled benefits so that they are not taxed twice on the benefits that are provided from April 2027 onwards. Leaving registration until the last moment therefore carries a risk that tax codes will not be updated in time for the first payroll of the new tax year, so we would encourage employers to decide early.
What changes from 6 April 2027?
Until 5 April 2027, benefits that are already voluntarily payrolled continue to follow the existing rules for 2026/27. The cash equivalent of the benefit is added to pay, Income Tax is deducted through payroll, and Class 1A National Insurance contributions (NICs) are calculated and reported on form P11D (b).
From 6 April 2027, however, employers who are registered to voluntarily payroll benefits must:
- Add the cash equivalent of the employees’ benefits to their pay; and
- Deduct Income Tax and account for any associated Class 1A NICs in real time using payroll software.
No need to re-register for benefits you already payroll. Under the existing rules, once an employer has registered to payroll a benefit voluntarily, that registration carries forward automatically into each new tax year unless it is explicitly removed. HMRC has confirmed that, for the mandatory rollout starting on 6 April 2027, no notification or re-registration is required for benefits that you are already payrolling. They will simply become part of your mandatory real-time submissions. Registration is therefore only needed for additional benefits that you are not currently payrolling and now wish to add.
Payrolled benefits will no longer need to be reported on forms P11D and P11D (b). This is a significant change for employers who currently payroll the Income Tax on a benefit but report the Class 1A NICs separately after the year end. That option will no longer be available for voluntarily payrolled benefits from April 2027, as the Income Tax and Class 1A NICs must now be managed as part of the employer’s real time payroll reporting obligations.
Telling your employees
Employers who payroll benefits must give employees written notification (by payslip, email or letter) by 1 June following the end of each tax year. The notification must explain that:
- The employee will not be taxed twice;
- Details of the payrolled benefits, which can include what the benefits are, their value, the cash equivalent and which have been subject to PAYE tax;
- The amount payrolled for optional remuneration arrangements (salary sacrifice); and
- Details of any benefits that have not been payrolled.
In the first year of payrolling, employees should also be told that their tax code will change to remove the adjustment for their benefits in kind and the adjusted amount will be put through payroll each pay period. Employees will be provided with a summary of the taxable benefit they received during the year. New employees must be told how the benefits they are provided with will be taxed.
Practical implications
Voluntary payrolling is not right for every employer. The decision should be made alongside your preparations for the introduction of Phase 1 of the mandatory payrolling of benefits in kind. We recommend that Employers consider the following:
- Review your benefits. Identify which benefits and expenses you provide beyond the Phase 1 benefits, and whether it would be beneficial to payroll them from April 2027 rather than April 2028.
- Consider Class 1A NICs. Real-time reporting of Class 1A NICs will bring forward the cash flow impact for any benefits you choose to payroll, so the timing of payments will need to be planned for.
- Check your payroll software. Speak to your software provider to confirm that it can collect the correct tax and Class 1A NICs on the benefits you intend to register.
- Decide on timing. Registration must be completed before 6 April 2027. Registering early will give HMRC time to amend employees’ tax codes.
- Review existing registrations. Benefits that you already payroll voluntarily will carry forward automatically and become part of your mandatory real-time submissions from 6 April 2027, with no need to notify HMRC or re-register. Consider whether you wish to continue payrolling them under the new real-time Class 1A rules. If not, you will need to cancel your registration before the new tax year begins.
- Prepare your communications. Plan the notifications that employees will need to receive.
How we can help
Our Employment Tax team can help you to assess which benefits could be voluntarily payrolled, model the Class 1A NIC cash flow impact, register through HMRC’s online service, and prepare your payroll and employee communications for April 2027. If you would like to discuss how these changes affect your business, please get in touch with Joanne Hennessy or Nick Bustin.
