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Organisations could risk additional costs and increased workloads
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Salary sacrifice car schemes’ BIK can be payrolled meaning tax is deducted from employees’ pay in real time
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Payroll systems need to integrate, including with HMRC, so opportunities for errors are minimised
1 June 2026: With less than a year to the 5 April 2027 P11d deadline, organisations need to prepare for the changes to reporting, which requires all employers to payroll the benefits they offer employees, according to Tusker experts.
The new regulations aim to create a standardised and more efficient way of managing the reporting of benefits by streamlining the reports, ensuring timely tax collection and reducing the opportunity for errors for both employers and employees.
However, organisations that haven’t started preparing for the changes could risk facing additional costs and increased workloads when they take effect. With reporting to be handled in real-time, employers may also face penalties if they submit information late to HMRC.
What the changes mean
From April 2027, taxing benefits through payroll will become mandatory, which means employers that currently report their benefits on P11D forms need to amend their payroll systems and processes. Benefits will be shifted to real-time reporting, which aims to simplify the current manual process and reduce delays.
For businesses running salary sacrifice car schemes, the Benefit-in-Kind can be payrolled, meaning tax is deducted from employees’ pay in real time rather than being collected later via the P11D process.
Employers need to ensure their payroll systems are integrated with other HR and financial systems, including HMRC, so that the opportunity for errors is minimised.
Cheryl Clements, Head of Business Development, Tusker, says:
“The P11D changes under mandatory BIK payrolling should reduce issues such as mistakes or incomplete reporting, creating a much smoother experience for everyone.”
“It offers a great opportunity for employers to simplify their BIK reporting processes and reduce delays. However, starting early is key to make sure organisations are fully prepared by the time April 2027 rolls around.”
Employers must start preparing now – or risk penalties
Employers should start preparing well in advance to ensure their payroll systems can handle the new real-time reporting requirements and avoid last-minute complications.They’ll need to check with payroll providers and software suppliers to ensure they are prepared for the new system – conversations with payroll teams should begin as soon as possible to ensure a smooth transition.
The key part of the process for employers is to understand the detailed changes. For example, one common misconception is that payrolling benefits removes all reporting obligations. While a P11D may no longer be required, employers still need to submit a P11D(b) to HMRC with details on benefits provided and Class 1A National Insurance owed as HMRC will penalise companies who don’t submit their reports..
There’s previously been some confusion around whether to use the P46/P11D process or payroll benefits like company cars through tax at source for a variety of benefits, such as salary sacrifice cars. This inconsistency has, in the past, has led to incorrect deductions, delayed payments, and added frustration for employees. These will be addressed with the new payrolling benefits system.
Tusker’s advice is to move quickly and get compliant systems in place early, before the deadline rolls around, as there’s just 10 months to go. As part of the project to change systems, employees need to be made aware of what the changes mean for their payslips – it’ll look different for them, so to avoid confusion, it’s best to communicate early so they know there isn’t anything they need to do (including contacting HMRC).
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Tusker is the UK’s leader in salary sacrifice cars. Part of Lloyds Banking Group, it has more than 16 years’ experience in offering an affordable way for employees to drive a new, fully insured, and maintained car. Its scheme, which is available to over 2.3 million UK employees, offers a range of options, from pure electric cars to hybrids and even traditional petrol and diesel vehicles. It provides a tailored scheme for organisations’ individual needs.
