As you may have seen recently, HMRC’s decision to delay mandatory payrolling of benefits in kind (BIKs) until 6 April 2027 has become a major talking point for employers and employees using salary-sacrifice car schemes.
While the delay gives businesses an extra year of breathing room (from the original April 2026 deadline), it marks a major change in how company vehicles, will be reported to HMRC.Here is a breakdown of what this delay and eventual change mean specifically for salary sacrifice car schemes.
1. A One-Year Reprieve
Company cars are notoriously one of the most complex benefits to payroll because their Benefit-in-Kind (BIK) value depends on variables that can change (such as precise emission levels, list prices, and part-year adjustments if an employee swaps vehicles).
Manually calculating and splitting a car’s annual BIK value across 12 monthly payroll cycles requires robust software; however, the delay to 2027 gives payroll software developers and employers the necessary time to ensure their systems can handle real-time car tax adjustments without causing chaotic monthly fluctuations in employee net pay.
2. The End of Year-End P11D Admin
Currently, most salary sacrifice car schemes like ours are managed via year-end reporting. The employer submits a P11D form after the tax year ends, and HMRC subsequently adjusts the employee’s tax code for the following year to reclaim the BIK tax.
From April 2027, Form P11D will be almost entirely phased out. Instead, the taxable value of the car will be reported dynamically every month via the Full Payment Submission (FPS). Meaning, the administrative burden shifts from a massive post-year-end scramble to a monthly, real-time payroll process.
3. Immediate “Real-Time” Tax for Employees
The current P11D system creates a lag: an employee drives a salary sacrifice car this year, but their tax code doesn’t adjust to pay for it until next year.
From April 2027, tax is deducted instantly. The annual BIK value of the car is divided by the number of pay periods (usually 12 months), and the income tax is deducted directly from their salary each month. Employees will no longer face unexpected tax code changes or “catch-up” tax bills a year after getting their car. The take-home pay shown on their monthly payslip will accurately reflect their current tax position.
4. Class 1A NICs Move into Payroll
For employers, Class 1A National Insurance Contributions (NICs) on company cars are traditionally paid in one lump sum in July following the end of the tax year.
Again, from April 2027, Class 1A NICs will also be calculated and paid directly through the payroll throughout the year. This changes cashflow patterns for businesses, spreading the National Insurance cost of the car scheme evenly across 12 months rather than hitting all at once in the summer.
What should operators and employers do right now?
While April 2027 feels far away, getting a salary sacrifice car scheme ready requires early preparation. Whilst businesses like ours will help you along the way, not all salary sacrifice providers are the same. Audit your payroll software and confirm with your payroll provider that their system is fully equipped to handle dynamic, real-time company car BIK deductions.
You should also ensure that your vehicle leasing or scheme provider can supply real-time data (such as exact vehicle delivery dates, mid-contract changes, or early terminations) directly to your finance team rapidly each month.
Finally, communicate early with staff; when transitioning to payrolling, employees must be reminded to check their HMRC tax codes. If HMRC doesn’t remove the old historic car adjustments from their code while the payroll begins deducting them live, staff could accidentally be taxed twice in the transition period.
