Payrolling company car and van benefits from April 2027

This guide covers employers in the UK that provide company cars, vans or fuel to employees. Every rule links to the HMRC page, Budget document or legislation that sets it, checked on 12 November 2026. It is not tax advice: payroll treatment depends on the employer's software, pay frequencies and benefit arrangements, and an adviser should check any decision.

Much of the detail is still in draft. HMRC published its interim guidance and legislation manual, last updated on 9 November 2026, the primary legislation is due in Finance Bill 2026-27, and the regulations that set out exactly how the regime works have not yet been published. This guide marks which rules are law today, which are in draft and which are HMRC guidance.

The short answer

• From 6 April 2027, employers must payroll company cars, car fuel, vans and van fuel, along with employer-provided medical benefits, under legislation that is still in draft. The Budget 2026 tax information and impact note says the measure "will have effect from 6 April 2027".
• Most other benefits follow from 6 April 2028. Employer-provided loans and living accommodation are left out for now: HMRC says mandatory payrolling for them "will be confirmed at a later date".
• Each pay day, the employer adds the benefit's cash equivalent, divided by the number of pay periods, to the driver's taxable pay and deducts the tax through PAYE. Class 1A National Insurance is worked out on the same amount each pay period and reported on the Full Payment Submission (FPS).
• No P11D or P11D(b) for payrolled benefits. Form P46 (Car) closes on 5 April 2027. Drivers get an annual payrolled benefits statement by 1 June instead.
• No registration is needed for the mandatory benefits. To payroll other benefits voluntarily in 2027 to 2028, an employer must register by 5 April 2027.
• An employer must not deduct more than 50% of an employee's pay in tax in a pay period, with pay counted before payrolled benefits are added. HMRC calls this the overriding limit.
• On THRIVE's worked figures for 2027 to 2028, a £48,000 electric car adds £200 a month to taxable pay, and a £36,000 diesel at 122g/km adds £900 a month. The worked example shows each step.

When does payrolling benefits become mandatory?

Payrolling becomes mandatory on 6 April 2027 for company cars, car fuel, vans, van fuel and employer-provided medical benefits. The Budget 2026 overview of tax legislation and rates puts the rest in a second phase: "All other benefits in kind, with the exception of employment-related loans and employer-provided living accommodation, will take effect from 6 April 2028."

From	What must be payrolled	Status
6 April 2027	Company cars, car fuel, vans, van fuel, medical benefits	Announced; draft legislation, due in Finance Bill 2026-27
6 April 2028	Most remaining benefits in kind and taxable expenses	Announced
Not yet set	Employment-related loans and living accommodation	"Will be confirmed at a later date"
Outside the regime for now	Benefits for eligible globally mobile employees	Exception on application to HMRC

The start date has moved once. HMRC's October 2024 technical note planned the change for April 2026. Its April 2025 update moved it to April 2027, and the Budget 2026 impact note split it into two phases after employers asked for more time. HMRC's own background notes explain why it did not delay cars and vans to 2028: some employers had already prepared, and "we wanted to ensure that the time and effort they have put into their preparations is not wasted."

What is law and what is still draft

• Draft primary legislation. The draft clause amends section 684 of the Income Tax (Earnings and Pensions) Act 2003 so that PAYE regulations can require benefits to be payrolled, not just authorise it. It also allows a penalty easement for careless errors in 2027 to 2028, and changes how classic cars are valued.
• Draft secondary legislation, not yet published. HMRC says regulations covering which benefits must be payrolled, what goes on the FPS, how Class 1A is reported and paid, and how errors are corrected "will be added to this manual in December 2026".
• Already law. The Income Tax (Pay As You Earn) (Amendment No. 3) Regulations 2026, in force since 5 November 2026, let employers apply to payroll loans and living accommodation voluntarily from 2027 to 2028.
• Guidance. HMRC's interim manual is guidance, and HMRC says it "will be moved over the next few months into existing GOV.UK payrolling guidance". The worked steps below follow it.

What employers must do

Registration

None for the mandatory benefits. HMRC's preparation guidance says: "You will not need to register to payroll mandatory company cars, car fuel, company vans, van fuel and private medical benefits from 6 April 2027 as it will be mandatory to payroll these benefits from this date." The voluntary payrolling service now says plainly that it cannot be used to register cars, vans, fuel or medical insurance: "You must report these benefits through your payroll software."

Employers must notify HMRC in two cases:

• to payroll other benefits voluntarily in 2027 to 2028, such as loans or accommodation. The service reopened on 5 November 2026, and HMRC says "you must register with HMRC by 5 April 2027". Anyone who misses it cannot payroll those benefits voluntarily for that year.
• to keep eligible globally mobile employees out of payrolling. This needs an exception from HMRC, applied for "as soon as you become aware" that an employee is or is likely to be globally mobile. HMRC's pages differ on timing: its preparation page says to apply by 5 April 2027, while its timeline calls that a recommended date and says "This is not a deadline".

Reporting through RTI each pay period

The method in HMRC's guide to reporting a benefit in real time: take the cash equivalent (or the relevant amount under a salary sacrifice), divide it by the employee's pay periods in the tax year, and round the result down to 2 decimal places. HMRC's own car and fuel examples do not always follow this: they show £416.67, £666.67 and £841.67, which are rounded to the nearest penny, so check which rule the payroll software applies. That figure is added to taxable pay each pay period, so PAYE takes the tax with the rest of the employee's pay. HMRC's examples say the amount is added to taxable pay, "not their gross pay for National Insurance contributions or pension".

The cash equivalent is worked out "in the same way as you do for a benefit that you report on a form P11D", and HMRC says "existing benefit valuation, making good and exemption rules will continue to apply". Nothing about the company car tax calculation changes. THRIVE's company car tax data page has the rates for every band.

Where a value is not known at the start of the year, the employer may use a "reasonable estimate" and correct it later. HMRC lists acceptable bases, such as the previous year's figure for a comparable benefit or a provider's estimated final figure. It gives "notional or 'peppercorn' values such as £1 or £0.01" and unevidenced round sums as examples of inaccurate estimates.

The 50% overriding limit

"You must not deduct more than 50% of an employee's pay in tax," says HMRC's guidance on when the full tax cannot be collected. For this purpose pay excludes the value of payrolled benefits. Tax above the limit is carried forward to later pay periods where the tax code is cumulative. Whatever is still uncollected at the year end is collected by HMRC through a P800 calculation or Simple Assessment, or through Self Assessment. The employer must still report the full benefit value. Under voluntary payrolling an employer could take an employee out of payrolling instead; the April 2025 technical note says that under mandatory payrolling "employers will be required to carry forward amounts".

Penalties in the first year

For 2027 to 2028, HMRC's penalties guidance says employers "will not be charged penalties for inaccuracies unless there is evidence of deliberate non-compliance". The draft clause limits the easement to inaccuracies that are "careless". Late filing and late payment penalties still apply, and the normal penalty regime returns from 2028 to 2029.

Do I still need a P11D after April 2027?

Not for payrolled benefits. HMRC's preparation page says "You will not need to report payrolled benefits using the P11D and P11D(b) forms." A P11D is still needed for anything not payrolled: in 2027 to 2028 that means most other benefits unless the employer registers to payroll them, plus loans, accommodation and employees covered by an exception.

Three other forms and notices change:

• P46 (Car) closes. "You will not be able to access the postal and digital P46 (Car) form from 6 April 2027 onwards," says HMRC. Car details go on the FPS instead.
• A new annual statement. HMRC says employers will be legally required, under the regulations still to be published, to give each employee with payrolled benefits an annual payrolled benefits statement by 1 June after the tax year. It must list the payrolled benefits, their value and cash equivalent, which were taxed through PAYE, and any amount payrolled under a salary sacrifice. HMRC sets no format: a letter, an email or an itemised final payslip will do.
• P60 and P45 stay as they are. Payrolled benefits form part of the total taxable pay figure, with no separate breakdown.

How is Class 1A National Insurance paid on payrolled benefits?

Each pay period, alongside the tax. HMRC's Class 1A guidance says employers "should calculate and report Class 1A National Insurance contributions at employee level for each pay period", rounding once on the employee's total, not benefit by benefit. HMRC's examples use a rate of 15%. The Class 1A rate is set by law at the employer (secondary) Class 1 percentage, under section 10 of the Social Security Contributions and Benefits Act 1992, and Budget 2026 Annex A lists that secondary rate as 15% for 2027 to 2028. Annex A does not list Class 1A separately. The employer pays it; it is not taken from the employee's pay.

Two timing points matter for cash flow:

• A one-off double payment in 2027. HMRC warns that in July 2027 employers still pay the annual Class 1A for 2026 to 2027 under the P11D(b) system, while also paying Class 1A in real time on benefits from April 2027. It calls this "a one-off overlap where two sets of Class 1A National Insurance contributions are due in the same financial year."
• Corrections keep the July deadline. HMRC's corrections guidance says extra Income Tax from a correction is due by 19 April (22 April if paid electronically), while extra Class 1A is due by 19 July (22 July electronically). In-year shortfalls of Class 1A are collected "through the employer's PAYE bill over the remainder of the tax year".

What changes for drivers

The tax a driver pays on a company car does not change; when and how it is collected does. HMRC's preparation page lists what employers should tell employees, including that their tax codes "will not include adjustments for payrolled benefits" and that "they will not pay more tax because of this change".

• Tax through PAYE, not the tax code. Today a car benefit is usually collected by reducing the driver's tax code, based on an estimate. From April 2027, the impact note says, "HMRC will remove the current-year mandated benefit from an employee's tax code to prevent the same benefit being taxed twice."
• Changes reach the payslip in year. A new car, a returned car or a new contribution changes the amount on the next payslip once payroll knows about it. Drivers no longer need to wait for a tax code change or a P800 the following year.
• Old underpayments still come through the tax code. HMRC will not remove earlier years' underpayments from tax codes. A driver can, for a while, pay this year's car tax through payroll and last year's shortfall through the tax code at once. HMRC suggests employers avoid calling this "double taxation", because the two amounts relate to different years.
• Drivers taking a car in March 2027. HMRC's common scenarios say a benefit provided in March 2027 belongs to 2026 to 2027 and is reported through whatever process the employer uses for that year, usually the P11D. If it continues, payrolling for 2027 to 2028 starts from the next available pay period after payroll is told.

Drivers with little or no pay in a period, such as those on statutory sick pay, are protected by the 50% limit above. Any hardship is a matter for HMRC: the guidance tells employers to point affected employees to HMRC to discuss their circumstances.

How do you payroll a company car benefit?

Work out the full-year cash equivalent as for a P11D, divide it by the number of pay days, and add that amount to taxable pay every pay day, recalculating whenever something changes. HMRC's rule for any change is the same: "work out the revised taxable amount" for the whole year, take off what has already been payrolled, and spread the balance equally over the remaining pay periods.

2027 to 2028 runs from 6 April 2027 to 5 April 2028 and includes 29 February 2028, so HMRC's examples count 366 days: "2027 to 2028 is a leap year tax year, so 366 days are used in the calculation."

A car swap

HMRC's own example: a monthly-paid employee has Car A (cash equivalent £6,000 a year) from 6 April 2027, and the employer payrolls £500 a month for April, May and June. Car B (£12,000 a year) replaces it on 1 July 2027. Car A's share is £6,000 × 86/366 = £1,410 and Car B's is £12,000 × 280/366 = £9,180, a total of £10,590. With £1,500 already payrolled, the remaining £9,090 is spread over nine months: £1,010 a month from July to March. The FPS records a "date car available to" for Car A and a "date car available from" for Car B.

The end of availability

When a car is handed back, the days after the last day of availability count as unavailable under section 143 of ITEPA 2003, which also reduces the charge for any period of 30 days or more when the car is not available. The employer enters the last date in the "date car available to" field on the FPS, and HMRC's car data guidance says this date cannot be later than 5 April. If the employee keeps the car after leaving, HMRC says the employer "must continue reporting the benefit through an FPS until the benefit ends", with any tax that cannot be deducted collected by HMRC after the year end.

A capital contribution

A lump sum the employee pays towards the car or its accessories reduces the price the charge is based on, up to £5,000, under section 132 of ITEPA 2003. The deduction applies in the year the contribution is made and in later years with the same car. On the FPS it reduces the "calculated price", which HMRC's car data guidance defines as the list price plus accessories, minus any capital contribution. The draft FPS list also has a separate field for the "capital contribution made by employees towards cost of car or accessories".

A private use contribution

Payments the employee must make for private use of the car reduce the cash equivalent pound for pound, provided they are paid on or before 6 July after the tax year, under section 144 of ITEPA 2003. HMRC is clear that these are not "making good": "Making good does not apply to company car and company van benefit charges, which are instead subject to separate employee contribution rules."

Under payrolling, the employer payrolls the cash equivalent net of the contributions it expects. HMRC's example: Car A (£6,000) with £1,000 of agreed private use payments is payrolled at £416.67 a month. After the swap to Car B (£12,000, with £2,000 of payments for a full year), the expected cash equivalent is £10,590, minus expected contributions of £1,765 (£235 for Car A and £1,530 for Car B), which leaves £8,825. With £1,250.01 payrolled by the end of June, the remaining £7,574.99 is spread at £841.67 a month from July to March.

Fuel

Free private fuel for a company car is a separate benefit, payrolled the same way. The car fuel benefit charge multiplier for 2027 to 2028 will be £30,200, multiplied by the car's appropriate percentage. This and the van figures below were announced at Budget 2026 and are still to be set by statutory instrument. The FPS records the "date free fuel provided" and, if it stops, the "date free fuel withdrawn". HMRC's preparation guidance singles out fuel as a benefit that can be hard to report in real time, and tells employers to agree payroll cut-off dates with fuel suppliers and drivers.

Vans and van fuel

A van with more than insignificant private use carries a flat charge, which for 2027 to 2028 will be £4,310, with £825 for van fuel. A monthly-paid driver's van therefore adds £359.16 a month to taxable pay (£4,310 ÷ 12 = £359.1666, rounded down as HMRC instructs) and van fuel £68.75. A zero emission van is reported "at 0%", and HMRC's common scenarios say a benefit "with a nil cash equivalent" does not need reporting. Vans need less data than cars: the draft FPS fields for vans are totals for the pay period and year to date, with no make, model or price. THRIVE explains the van charge in company van tax and the van benefit charge.

Salary sacrifice cars and optional remuneration

Cars and vans taken through salary sacrifice, which HMRC calls optional remuneration arrangements (OpRAs), must be payrolled from 6 April 2027 as well. HMRC's common scenarios say: "Company cars, car fuel, vans, van fuel and medical benefits provided under an OpRA will need to be payrolled from 6 April 2027."

• What gets payrolled. Under an OpRA, the taxable value is "the higher of the cash salary given up or the benefit's normal taxable value", and that higher figure is spread over the year's pay periods.
• Electric and low-emission cars. The OpRA rules do not apply to "cars with CO2 emissions of 75g/km or less", so for these cars the normal cash equivalent is payrolled, however much salary is given up.
• The FPS field. HMRC's car data guidance already uses a single field, "cash equivalent or relevant amount", where the relevant amount is the taxable figure under a salary sacrifice.

Budget 2026 did not announce any change to how salary sacrifice cars are taxed; THRIVE found no OpRA measure in the overview of tax legislation and rates. THRIVE's salary sacrifice data page compares the cost to drivers.

What payroll needs from the fleet system

Payroll now needs car data before each pay run, not once a year. HMRC's guidance for third party benefit providers names "fleet providers supplying company car data" and says employers "will need benefit information before payroll is processed". Leasing companies are not made reporters: they are "not required to operate mandatory payrolling themselves but may need to provide employers with timely and accurate benefit information".

The draft list of car fields on the FPS, grouped by THRIVE according to who usually holds them. HMRC lists the fields without saying who supplies them.

Usually held by (THRIVE's grouping)	FPS car fields
Leasing company or fleet system	Make and model; date first registered; CO2 emissions; zero emissions mileage; fuel type; engine size; car identifier; list price and accessories, as the calculated price and accessories not in the list price
Fleet manager	Date car available from; date car available to; date free fuel provided; date free fuel withdrawn
HR or reward	Capital contribution by the employee; amount paid by the employee for private use
Payroll	Cash equivalent of car and of fuel; totals for the pay period and year to date; amendment indicator

The CO2 figure is the one on the V5C, and zero emission mileage, needed for cars at 1 to 50g/km, "can be obtained from the car leasing firm or fleet provider". The full specification is in HMRC's RTI technical specifications for 2027 to 2028.

Data flow and deadlines

HMRC asks providers to supply data that is "complete", "timely", "consistent", "accurate", "traceable", "correctable" and "machine-readable", meaning at least .xlsx or .csv rather than PDF or paper. It asks providers and employers to agree who owns each data item, the transfer method and frequency, payroll cut-off dates, and how starters, leavers, mid-year changes and corrections are handled. Where values are known in advance, it suggests sending them before the tax year starts rather than every pay period.

Date	What happens
5 November 2026	Voluntary payrolling registration for 2027 to 2028 reopens, now including loans and accommodation
December 2026	HMRC expects to add the draft regulations to its interim manual
By 5 April 2027	Register to payroll non-mandated benefits voluntarily for 2027 to 2028; recommended date for globally mobile exception notices; P46 (Car) closes
6 April 2027	Mandatory payrolling starts for cars, vans, car fuel, van fuel and medical benefits
Every pay day from April 2027	Benefit values, car data and Class 1A on the FPS
By 19 April 2028	Last date for in-year corrections to 2027 to 2028 by further FPS
By 1 June 2028	Annual payrolled benefits statements to employees
6 July 2028	Last date for private use payments for 2027 to 2028 to count; P11D copies to employees for any non-payrolled benefits
19 July 2028 (22 July electronically)	Class 1A due on any 2027 to 2028 correction; annual Class 1A for P11D(b) benefits

THRIVE's worked example

On these assumptions: tax year 2027 to 2028; a monthly-paid employee (12 pay days); both cars available all year with no contributions unless stated; list prices include accessories and options; the diesel meets the Euro 6d standard; Income Tax at 20% or 40% on the benefit, and Class 1A at 15%, the 2027 to 2028 employer rate in Budget 2026 Annex A. The list prices are THRIVE's illustrations, not specific models.

The appropriate percentages for 2027 to 2028 come from HMRC's future rates table: 5% for a 0g/km car and 30% for 120 to 124g/km. A diesel that meets Euro 6d uses the same table as a petrol car, because the 4 percentage point diesel supplement in section 141 of ITEPA 2003 applies only to diesel cars that do not meet it (and to all diesels first registered before 1 September 2017). Euro 6d-TEMP does not count as meeting it. THRIVE's guide to company car tax rates to 2031 shows how these percentages rise.

Step	Electric car	Diesel car
List price	£48,000	£36,000
CO2 and appropriate percentage, 2027 to 2028	0g/km: 5%	122g/km: 30%
Annual cash equivalent (list price × percentage)	£2,400	£10,800
Added to taxable pay each month (÷ 12)	£200.00	£900.00
Tax each month at 20%	£40.00	£180.00
Tax each month at 40%	£80.00	£360.00
Employer Class 1A each month at 15%	£30.00	£135.00
Employer Class 1A for the year	£360.00	£1,620.00

A weekly-paid employee with 52 pay days and the electric car would have £46.15 added each week (£2,400 ÷ 52 = £46.153, rounded down).

Variations on the diesel

• Free private fuel. £30,200 × 30% = £9,060 a year, or £755 a month added to taxable pay: £151 a month in tax at 20%, £302 at 40%, and £113.25 in Class 1A.
• A £3,000 capital contribution. (£36,000 - £3,000) × 30% = £9,900 a year, or £825 a month.
• A private use contribution of £50 a month. £10,800 - £600 = £10,200 a year, or £850 a month, provided the payments are made by 6 July 2028.
• A swap to the electric car on 6 October 2027. The diesel is available for 183 days (6 April to 5 October) and the electric car for the other 183. The year's cash equivalent is £10,800 × 183/366 = £5,400 plus £2,400 × 183/366 = £1,200, a total of £6,600. By the end of September, six payments of £900 have put £5,400 through payroll, so the remaining £1,200 is spread over six months at £200 a month, assuming payroll hears of the change before the October run.
• The diesel handed back on 30 November 2027, with no replacement. The car is available for 239 days, so the year's cash equivalent is £10,800 × 239/366 = £7,052.46. Seven payments of £900 to October total £6,300, leaving £752.46 to spread over the five pay days from November to March: £150.49 a month, rounded down.

These figures show the payroll mechanics only. Actual tax depends on the employee's tax code, other income and, in Scotland, the Scottish rates of Income Tax. For the full cost of a car over a lease, see THRIVE's guide to leasing or buying company cars and vans.

Readiness checklist

1. List every car, van and fuel benefit currently on P11Ds, including salary sacrifice cars and drivers who keep a car after leaving.
2. Ask the payroll software provider when its 2027 to 2028 release supports the new FPS benefit and Class 1A fields, and test it. Users of HMRC's Basic PAYE Tools will get the update from HMRC, which says the tool will be updated for April 2027.
3. Agree a data feed with each leasing company or fleet provider: the fields in the table above, in .csv or .xlsx, with a cut-off before each payroll run and a named contact for corrections.
4. Set a process for in-year changes: who tells payroll about a swap, a return, a new contribution, a long-term unavailability or fuel being withdrawn, and by when.
5. Decide on other benefits. To avoid running payroll and P11D side by side, register to payroll them voluntarily by 5 April 2027, or plan to keep P11Ds for them until April 2028.
6. Apply for any globally mobile employee exceptions by 5 April 2027.
7. Budget for Class 1A twice in 2027 to 2028: the annual 2026 to 2027 payment in July 2027 plus real-time Class 1A from April 2027.
8. Finish 2026 to 2027 the old way: P11D and P11D(b) for that year, including any car first provided in March 2027.
9. Tell drivers before April 2027 what changes on their payslip and tax code. HMRC's preparation guidance includes a sample letter.
10. Prepare the annual payrolled benefits statement for June 2028, and keep records of each benefit, estimate and contribution for three years.

About this guide

THRIVE researched this guide from HMRC's interim guidance manual (updated 9 November 2026), HMRC's other payrolling guidance, the Budget 2026 documents, the July 2026 draft clause and the legislation linked above. Each claim was checked against its source on 12 November 2026. The worked example is THRIVE's arithmetic on the stated assumptions.

It does not cover medical benefits, the benefits mandated from April 2028, loans, accommodation, globally mobile employees in detail, the classic car valuation change or Northern Ireland and Scottish tax rates. It is not tax advice.

THRIVE will review it when HMRC adds the draft regulations to its manual, which HMRC expects in December 2026, when Finance Bill 2026-27 receives Royal Assent, and before 6 April 2027.

Cite as: THRIVE, Payrolling company car and van benefits from April 2027, thrivefleet.co.uk. The figures are free to quote with a link to this page.