From 6 April 2027, employers must payroll taxable benefits in kind and expenses in real time, including company cars, car fuel, vans, van fuel, and employer-provided medical benefits. Most other benefits will become subject to mandatory payrolling from April 2028, while employment-related loans and accommodation will remain voluntary.

Employers wishing to payroll non-mandatory benefits voluntarily for the 2027–28 tax year will be able to register through HMRC’s online service from November 2026. The service will allow employers to register benefits such as employment-related loans and accommodation for payrolling from April 2027.

Under the new arrangements, employers who voluntarily payroll non-mandatory benefits must also report and pay the associated Class 1A National Insurance contributions through the payroll from 6 April 2027. These contributions can no longer be reported separately at the end of the tax year.

Employers already registered for voluntary payrolling will automatically continue into 2027–28. Employers who wish to stop voluntary payrolling for non-mandated benefits must do so by 5 April 2027.

Because of the practical difficulties of real-time reporting, employers with eligible globally mobile employees will be permitted to voluntarily exclude those individuals from the mandatory real-time requirements. HMRC plans to make a new online service available in November 2027 for employers to choose this option and identify the employees concerned, who will instead continue to be reported via the traditional year-end P11D process.

Employers should ensure they review their benefits arrangements and payroll systems ahead of these changes.

Employers must make sure their staff receive at least the National Minimum Wage or National Living Wage rate that applies to them. The correct rate depends on the worker's age and, in some cases, whether they are an apprentice.

Since 1 April 2026, workers aged 21 and over are entitled to the National Living Wage of £12.71 an hour. The rate for workers aged 18 to 20 is £10.85, while workers under 18 are entitled to minimum of £8 an hour. 

Apprentices also have a minimum rate of £8 an hour, but this does not apply throughout their apprenticeship. An apprentice is entitled to the apprentice rate if they are under 19, or if they are 19 or over and in the first year of their apprenticeship.

Once an apprentice aged 19 or over has completed the first year of their apprenticeship, they become entitled to the minimum wage rate for their age. For example, a 21-year-old apprentice in their first year is entitled to £8 an hour, but after completing that first year they must receive at least £12.71 an hour.

Employers who fail to pay the minimum wage can face significant financial penalties. HMRC can require arrears to be repaid and impose penalties of up to 200% of the underpayment, subject to the applicable rules. Serious cases can also result in criminal prosecution.

Employers should therefore review rates regularly, particularly when employees have a birthday or apprentices reach the end of their first year.

The minimum wage rates change every 1 April, so payroll systems should be updated promptly to avoid underpayments.

The Government has named nearly 660 employers for failing to pay workers the National Minimum Wage, highlighting how costly National Minimum Wage compliance failures can become.

The latest naming round, published on 3 September 2026, involved around £4 million being repaid to more than 27,000 workers. Employers were also issued with penalties totalling £7 million.

The key point for employers is that minimum wage compliance is not simply a matter of comparing an employee's hourly rate with the statutory minimum.

For workers aged 21 and over, the National Living Wage is £12.71 an hour from April 2026. The rate is £10.85 for those aged 18 to 20 and £8.00 for workers under 18 and qualifying apprentices.

Problems can still arise where the stated hourly rate appears correct.

Employers need to consider the actual pay received for minimum wage purposes and all working time. Certain deductions can reduce minimum wage pay, while unpaid activities such as opening or closing premises, compulsory training, changing into required clothing or carrying out security checks can also create problems.

Errors may also arise where employees are expected to buy items connected with their employment.

Small mistakes repeated across several employees and over a period of time can therefore become significant liabilities.

Employers who underpay workers may have to repay arrears and face financial penalties. Public naming can also cause reputational damage.

This is a good time to carry out a simple review.

Check payroll rates, particularly after birthdays that move younger employees into a higher age band. Review deductions, working-time arrangements and any employee expenditure connected with work.

Businesses employing apprentices should also make sure the apprentice rate is being used correctly.

Most employers intend to pay staff properly. The difficulty is that the rules are more complex than they first appear.

A short review now could identify an innocent error before it becomes an expensive one.

Bonuses are treated as taxable earnings, so both employers and employees need to understand how they are taxed and reported.

For cash bonuses (including vouchers that can be exchanged for cash), the rules are straightforward. The payment is added to an employee’s normal salary and taxed through the Pay As You Earn (PAYE). This means employers must deduct Income Tax and National Insurance (Class 1) in the usual way through payroll.

Bonuses can sometimes push employees into a higher tax band for that pay period, so the net amount received may be lower than expected.

For non-cash bonuses, such as gifts or rewards, the treatment depends on what is provided. If the item is considered as something that can easily be turned into cash then it is taxed in the same way as cash through PAYE. Other benefits may instead be treated as benefits in kind. A list of typical expenses and benefits and their tax treatment can be found at https://www.gov.uk/expenses-and-benefits-a-to-z

It is important for employers to ensure they apply the correct treatment and reporting method for bonuses, as errors can lead to underpaid tax or penalties.

Mandatory payrolling of benefits in kind (BiKs) and taxable employment expenses will be introduced from 6 April 2027. This represents a major change in reporting and means that for most benefits, the annual P11D form will no longer be required from the start of the 2027-28 tax year.

The requirement to report Income Tax and Class 1A National Insurance on most BiKs through Real Time Information (RTI) was originally due to start on 6 April 2026 but has been delayed until 6 April 2027 to allow additional time for employers, payroll professionals, software providers and agents to prepare.

The deadline to register for the current voluntary payrolling service for the 2026-27 tax year is 5 April 2026. After this, the service will close in preparation for the introduction of mandatory payrolling. 

From April 2027, employers will report BiKs and expenses via the Full Payment Submission (FPS), aligning reporting with the process currently used for reporting salaries. The number of RTI fields will be expanded to reflect the data currently captured through P11D and P11D(b) forms. Employers will also have the option to payroll employment-related loans and accommodation on a voluntary basis.

To support implementation, HMRC will waive penalties for inaccuracies related to mandatory payrolling for 2027–28, provided there is no evidence of deliberate non-compliance. However, existing late filing, late payment penalties and interest will continue to apply.

HMRC has confirmed that its Basic PAYE Tools software will also be updated to support payrolling of benefits in kind from April 2027.

As we move into the start of 2026, it is not that long until the current 2025–26 tax year comes to an end and there are a number of payroll annual reporting obligations that must be completed. This includes sending a final PAYE submission for the tax year. The final Full Payment Submission (FPS) needs to be submitted on or before your employees’ final payday for the 2025–26 tax year.

It is also important that employers remember to provide employees with a copy of their P60 form by 31 May 2026. A P60 must be given to all employees that are on the payroll on the last day of the tax year, 5 April 2026.

The P60 is a statement issued to employees after the end of each tax year that shows the amount of tax they have paid on their salary. Employers can provide the P60 form on paper or electronically. Employees should ensure they keep their P60s in a safe place as it is an important record of the amount of tax paid.

In addition, a P60 is required in order that an employee can prove how much tax they have paid on their salary, e.g.:

Employees who have left their employment during the tax year do not receive a P60 from their employer, as the same information will be on their P45.

The deadline for reporting any Class 1A National Insurance contributions and submitting P11D and P11D(b) forms to HMRC for the tax year ending 5 April 2026 is 6 July 2026.

Employers must ensure they are paying staff at least the National Minimum Wage (NMW) or National Living Wage (NLW). The NMW and the NLW are the minimum legal amounts that employers must pay their workers. The latest NMW and NLW rates took effect on 1 April 2025. The current hourly rate for the NLW is £12.21. For those aged 18 to 20, the NMW is £10.00 per hour. Workers aged 16 to 17 and apprentices are entitled to £7.55 per hour.

The minimum wage is calculated as an hourly rate, but it applies to all eligible workers however they are paid. This means that even if someone is paid an annual salary, and it is paid by the piece or in other ways, they must still calculate their equivalent hourly rate to check whether they are receiving at least the minimum wage.

To do this correctly, it is also important to understand what counts as working time under NMW rules.

According to HMRC guidance, for all types of work, this includes time spent:

Working time does not include time spent:

Registering for payroll is essential when hiring staff. From HMRC registration to legal compliance, getting payroll processes right ensures your team is paid correctly and your business avoids penalties.

When starting a business and hiring employees for the first time, one of the most important administrative steps is setting up a payroll scheme. This process ensures your employees are paid correctly and that your business complies with the necessary tax and employment laws.

The first step is to register as an employer with HMRC. You must register even if you are only employing yourself, for example you are the director of a limited company. This registration must be completed before your first payday. You need to register in most scenarios including for any employee earning at or over the minimum secondary threshold of £96 a week (2025–26 threshold).

Another important part of the payroll process is deciding whether you will run payroll yourself or use a payroll provider. If you manage it yourself, you must choose an approved HMRC-recognised payroll software to record employee details, calculate pay and deductions and report to HMRC.

Once registered, you’ll need to:

You must also:

You will also need to complete annual payroll tasks. Setting up a payroll scheme can be complex, and we would of course be happy to help you choose the optimal set-up for your circumstances. We can also, if required, manage the payroll process for you.

The government has scrapped plans for detailed PAYE reporting of employee hours from April 2026, citing concerns over cost, complexity, and practicality. Employers will stick with current rules.

As part of the Spring 2025 Tax Update: Simplification, Administration and Reform summary, the government confirmed that it will no longer proceed with the previous governments plans to mandate more detailed reporting of employee working hours through Pay As You Earn (PAYE) Real Time Information (RTI) submissions. 

Under the original proposals, employers would have been required to submit significantly more detailed employee hours data on the hours worked by each employee via RTI returns from 6 April 2026. These proposals were reflected in the draft Income Tax (Pay As You Earn) (Amendment) Regulations 2025, which were expected to formalise the changes in law. However, the government has now announced that it will not take these draft regulations forward, effectively shelving the proposed reforms.

The enhanced reporting requirements would have meant employers providing detailed data on actual hours worked per pay period, as opposed to the current obligation to report an employee’s normal working hours. Significant concerns were raised by employers, payroll providers, and representative bodies regarding the complexity, cost, and practicality of these changes. 

Employers will therefore continue to report normal hours worked using the existing RTI framework, without the need to supply more detailed information. 
 

HMRC has delayed mandatory payrolling of benefits in kind by a year to April 2027, giving employers and software providers more time to prepare. Penalties will be eased in the first year.

The requirement to report Income Tax and Class 1A National Insurance Contributions for most BiKs and expenses through Real Time Information (RTI) will now begin from 6 April 2027, rather than 6 April 2026 as previously announced.

From April 2027, employers will report BiKs and expenses via the Full Payment Submission (FPS), aligning with the method currently used for reporting salaries. The number of RTI fields will be expanded to reflect the data currently captured through P11D and P11D(b) forms.

The deferral is intended to give payroll professionals, software providers, tax agents and others additional time to prepare for the transition. From April 2027, employers will also have the option to payroll employment-related loans and accommodation on a voluntary basis.

To support a smooth rollout, HMRC will waive penalties for inaccuracies related to mandatory payrolling for 2027–28, provided there is no evidence of deliberate non-compliance. However, existing late filing, late payment penalties, and interest will continue to apply.

HMRC has confirmed that its Basic PAYE Tools software will also be updated to support payrolling of benefits in kind from April 2027.