Industry News Benefits, Reward & Experience

Employers face new payroll requirements for workplace medical benefits from April 2027

All Sectors

UK employers providing taxable medical benefits will be required to report them through payroll from April 2027, under government reforms that will change how employee benefits are administered and taxed.

The changes, confirmed in the Autumn Budget on 28 October, will introduce mandatory real-time reporting of certain benefits in kind, including employer-provided medical benefits, company cars, vans and associated fuel benefits.

From 6 April 2027, employers will need to calculate and report the relevant Income Tax and Class 1A National Insurance contributions through their payroll systems, replacing existing end-of-year reporting arrangements for most affected employees.

The reforms are intended to modernise the administration of employee benefits and bring tax reporting closer to the point at which benefits are provided.

For HR, reward and payroll teams, the changes will require preparation, particularly where employers provide private medical insurance or other taxable healthcare benefits as part of their employee wellbeing offering. Currently, many taxable benefits are reported after the end of the tax year using P11D forms, with the associated tax collected through employees’ tax codes.

Under the new arrangements, relevant benefits will instead be reported through Real Time Information, the system employers already use to submit payroll information to HM Revenue & Customs. This will require employers to ensure that accurate benefit values are available when payroll is processed and that HR, benefits administration, finance and payroll systems can exchange the necessary information.

The introduction will take place in phases. Medical benefits and specified vehicle-related benefits will be included from April 2027, with most remaining taxable benefits brought into mandatory payrolling from April 2028.

Employer-provided accommodation and employment-related loans are exceptions, with the timetable for their mandatory inclusion to be confirmed separately.

HMRC has also introduced transitional arrangements for certain globally mobile employees, recognising that international working arrangements can create practical difficulties when calculating taxable benefits in real time.

Employers will be able to apply for eligible employees to remain outside mandatory payrolling through a new HMRC process, with existing year-end reporting arrangements continuing to apply.

The changes are particularly relevant as organisations expand their investment in workplace healthcare, preventative health services and employee benefits.

Although the reforms do not directly change the underlying healthcare provision available to employees, they will affect the administrative processes supporting taxable medical benefits.

For employers, clear communication will be important to help employees understand how benefits appear on payslips and how associated tax is collected.

The transition also presents an opportunity to review existing benefits arrangements, particularly where multiple providers, platforms or internal systems are involved. A more connected approach to benefits administration could help organisations reduce reporting errors and improve the information available to employees about their total reward package.

However, employers will need to distinguish between taxable medical benefits covered by the reforms and other health and wellbeing services that may be subject to different tax treatment. From a workplace wellbeing perspective, effective benefits administration is an important part of ensuring employees understand and can access the support available to them.

As healthcare benefits become a more established element of workforce health strategies, the ability to communicate their value clearly and administer them accurately will become increasingly important.

HMRC is advising employers to review their benefits provision, assess payroll readiness, engage with software providers and prepare employee communications ahead of the April 2027 implementation date.

Related News

The List, your Trusted Workplace Wellbeing Directory

A curated community where People Leaders find trusted Workplace Wellbeing providers, and providers find meaningful business.
Access The List Join The List