Millions of UK employees with a company car, van or private medical insurance through work face big changes on how they are taxed on those benefits from April 2027.
From the 6th April next year, employers across the UK will be required to report most employee benefits through real-time payroll, rather than the annual P11D process, in one of the most significant changes to payroll in a generation.
The reform by HMRC, which is one of the biggest shake-ups to employee benefits taxation in a generation, will end the practice of employers reporting these perks annually, months after the tax year has closed.
With little more than a year to prepare, the Chartered Institute of Payroll Professionals (CIPP) is warning that employers who don’t have qualified payroll professionals in place risk miscalculating tax and National Insurance contributions from day one.
The CIPP is using National Payroll Week (7-11 September) to raise awareness of the issue. Mathew Akrigg, Policy and Advisory Leader at the CIPP, said the change makes qualified payroll expertise more essential than ever;
“While the change is designed to close the gap between when tax is owed and when it’s paid, it also demands far greater accuracy, in-year data quality and technical understanding than the current system – placing pressure on payroll teams to get it right immediately, not retrospectively.
“This is the biggest shake up to tax on employee benefits in a decade and we are concerned that – without qualified, experienced payroll professionals overseeing it, there will undoubtedly be errors which will see employees paying the wrong amount of tax on their benefits, without them realizing it.
“The best way to avoid that is to ensure businesses have in place trained payroll experts who are the safeguard that prevents employees being over or under-taxed.”
With additional guidance and technical specifications due towards the end of the year and just seven months left until the April 2027 implementation, the CIPP is reminding employers to stay up to date with the latest developments; falling behind risks both compliance penalties for the business and tax errors landing directly on employees’ payslips.
The Chartered Institute of Payroll Professionals (CIPP) is the only Chartered Institute for the pay professions in the UK. With over 8700 individuals benefitting from the CIPP’s membership benefits and thousands of professionals using CIPP-approved qualifications and training, the Institute is dedicated to raising the profile of payroll in businesses across the UK.
Image provided by The Chartered Institute of Payroll Professionals (CIPP)
