HM Revenue and Customs is phasing out annual reporting of benefits in kind for company cars.
The reforms will come into effect from April 6, 2026 and with the draft legislation not due until 2025, many fleets are facing short deadlines to comply with these changes.
From tax year 2026/27, employers must report the value of any employment benefits (anything provided in addition to wage income) to HMRC through their payroll software and collect any taxes at the same frequency as employees are paid – even if that is weekly. .
Although some employers have already opted for that newer system, many still collect in-kind director benefits on a monthly basis, reporting at the end of the financial year using a P11d form and collecting any unpaid taxes at the same time. They have less than eighteen months to reform that process.
Simon Down, director of Deloitte’s Employment Tax Automotive team, warned that this could pose administrative challenges, such as reporting vehicle changes to payroll more frequently, including downtime for repairs and car loans lasting longer than 30 days.
“A key risk is that with a reduction in the amount of time spent collecting, validating and processing fleet data, errors can be made,” he says. “This could create a very poor employee experience, where they are charged on vehicles they should not be charged, or if there are other issues with the data that are not identified and resolved within the narrow pay window.
“Where these negative experiences are allowed to occur and persist, a company car scheme may come under negative internal supervision. Ensuring quality data and a robust approach to collecting, validating and processing that data is critical.”
The reforms also affect wage sacrifice schemes, where employees pay monthly lease costs from their pre-tax salary and (if the car emits 75g/km of CO2 or less) receive in-kind compensation for the use of the vehicle.
Cheryl Clements, head of business development at Tusker, says benefits payments give drivers more transparent, predictable monthly costs while reducing the risk of tax arrears. However, she advises registering early: companies have until the start of the tax year (on April 6) to register.
“You have five months left, so why not do it from April 2025?” she said. “Setting up won’t take long and many people will wait until April 2026. If you need to get your payroll team or payroll involved. They may incur the costs of keeping everyone informed and on board.
“Contact HMRC. Then say to your payroll team or payroll provider: ‘We would like to do this. What do we need to do to make this possible?’ They should be able to arrange that through the system.”