The government has announced a rise in Benefit in Kind (BiK) rates for company car drivers, effective from 6 April 2027. This marks the beginning of phase one of a wider initiative that will cover company cars, car fuel, vans, van fuel, and employer-provided medical benefits.
Following this, phase two will commence on 6 April 2028, extending mandatory payrolling requirements to most other employee benefits. Notably, employer-provided loans and living accommodation will remain exempt from mandatory payrolling until a later date.
Initially, the government planned to apply mandatory payrolling to nearly all benefits from April 2027. However, after consulting with employers and software developers, HM Revenue and Customs (HMRC) announced in June 2026 that the rollout would be phased, with some benefits deferred to April 2028.
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In effect, the benefits involved in the first phase encompass the majority of items typically declared on forms P11D. Therefore, for many employers, the decision to phase the implementation may have limited practical impact.
Tax expert Pete Barden highlights that individuals will be required to pay tax if they or their family members use a company car for private purposes, including commuting. The taxable amount is based on the vehicle’s value to the user, which considers factors such as its purchase price and the type of fuel it consumes.