Upcoming Payroll Changes for Company Cars and Medical Benefits

Company cars and medical benefits will be moving into payroll. Find out what your business needs to do.

Does your company provide a company car or private medical insurance for you or your team? These can be valuable benefits, but the way you handle the tax on them is changing from April 2027.

Even if you’re the only director receiving a benefit, your company could be affected. Understanding what’s coming will give you time to prepare, without leaving everything until the first payroll of the new tax year.

What’s changing?

Under HMRC’s current timetable, mandatory payrolling of benefits in kind starts on 6 April 2027. The first phase covers taxable company cars, car fuel, vans, van fuel and employer-provided medical benefits.

In practice, the taxable value of these benefits will go through payroll, with employees’ income tax collected each pay period. Your company’s Class 1A National Insurance on them will also be reported and paid during the year.

Most other benefits follow from April 2028. You won’t need to register for the mandatory benefits. HMRC’s guidance is still interim, with final details expected alongside the Autumn Budget 2026.

The aim is to reduce year-end reporting and make tax payments more accurate. Once the process is in place, it should also be easier to keep track of benefit costs.

What this means for your payroll

The main adjustment is keeping payroll up to date throughout the year. That means letting payroll know when someone changes their company car or the cost of their medical cover changes.

A useful starting point is a list of who receives each benefit, including directors, and its taxable value. Your payroll provider can then help you work out how to share updates and whether your software needs changing. This is worth discussing even if you already payroll benefits voluntarily.

A change to payment timing

There’s also a cash flow point to be aware of. In July 2027, you’ll still pay Class 1A National Insurance for benefits provided in 2026/27, while payments for the new tax year will already have started through payroll.

Allowing for both in your forecast will help you see what your company needs to set aside.

What your team might notice

Some employees may pay tax on current benefits while earlier tax underpayments are still being collected. That could affect their take-home pay.

Talking it through before April will help them understand their payslips and give them time to budget.

How we can help

You don’t have to work through the changes on your own. Our payroll service can help with benefit calculations and reporting, taking the extra admin off your hands.

Our Virtual Finance Office can also bring payroll, bookkeeping and cash flow planning together, so you’ve got a clearer picture of what’s coming out and when.

If you’re wondering how this will affect your company, get in touch. We’ll talk you through what applies to you and help you prepare.

Call 01603 812131 or email enquire@swintonaccountants.co.uk