Company car or staff health cover? In 2027 you pay two years of National Insurance on them in one

If your company gives anyone a car, a van, free fuel or private medical cover, all of it moves onto the payroll from 6 April 2027. The tax and the employer National Insurance will be worked out and paid every pay day, not a year later on a P11D form. Nothing about the rate changes. The timing does, and HMRC itself warns about the side effect: in the 2027/28 tax year you pay last year's Class 1A in one July lump and start paying this year's every month. One year, two years of the bill. The rest of this page puts that on real numbers, then covers the bit owners tend to miss, which is what it does to your own payslip and to the perks your staff never knew were taxed.

Which perks are caught, and when

From 6 April 2027, you must put these through payroll:

• company cars
• fuel for private use in a company car
• vans
• van fuel
• private medical cover and other medical benefits you pay for

From 6 April 2028, most other taxable benefits follow. Two stay outside for now: loans to staff and accommodation you provide. You can still report those on a P11D, or payroll them voluntarily.

You do not need to register for the April 2027 benefits. It is automatic, and HMRC will take the benefits out of your staff's tax codes before the year starts. Registration only matters if you want to payroll benefits that are not compulsory yet. That service opens in November 2026 and the deadline is 5 April 2027.

How it works on a payslip

Today, you report benefits after the year ends on a P11D. The employee usually pays the tax through an adjusted tax code or their Self Assessment, and you pay the employer's Class 1A National Insurance by 22 July after the year ends. Class 1A is the employer National Insurance charged on benefits rather than wages, and the rate for 2026/27 is 15%.

From April 2027, payroll takes the yearly value of each benefit, splits it across the pay days, and adds that slice to the person's taxable pay. HMRC's own example: a benefit worth £2,100 a year becomes £175 a month on the payslip. Income tax is taken from their pay on that £175, and you work out 15% Class 1A on it, reported in the same payroll submission.

One company, one car, six health policies

Here is a made-up but ordinary example. Swap in your own numbers from your last P11D.

A clinic company. The owner has a company car with a taxable value of £9,000 a year. The company pays private medical cover for the owner and five staff, worth £1,200 each, so £7,200. Total benefits: £16,200.

Class 1A at 15% on £16,200 is £2,430 a year. That is the cost today, and it is the cost after April 2027. The difference is when the money leaves:

• 22 July 2027: you pay £2,430 for the 2026/27 year, the last one done the old way.
• Every month from April 2027: you pay about £202.50 for 2027/28, through payroll.

So the 2027/28 tax year carries £4,860 of Class 1A instead of £2,430. HMRC's guidance calls this "a one-off overlap" and tells employers to budget for it.

It is not a new tax. The total you pay over the life of the business does not change. But a small business does not run on lifetime totals, it runs on the bank balance in August. If your margin is thin, find that extra £2,430 (or your version of it) before it finds you.

Your own payslip shrinks too

If you are the director with the car, you are an employee for this purpose. Say you pay yourself a salary of £12,570 (£1,047.50 a month) and take the rest as dividends. Your car and your health cover, £10,200 between them, become £850 a month of extra taxable pay. If that falls in your basic rate band, payroll takes about £170 a month in tax from your salary, and your net pay drops from £1,047.50 to roughly £877.50.

That money is not lost. It is tax you were paying anyway, just later. But check two things with your accountant:

• If the tax on your benefits has been settled through Self Assessment rather than your tax code, the bill due on 31 January 2028 still covers 2026/27, while payroll is already taking 2027/28's tax each month. That is your personal version of the overlap.
• Your payments on account for 2027/28 are half of the previous year's bill each, so they may be sized on a year when the car tax was not taken at source. If you know your Self Assessment bill will be lower, you can ask HMRC to reduce them. If you reduce them too far, you pay interest on the shortfall.

The 50% rule, for very small salaries

Payroll cannot take more than 50% of someone's pay in tax in a pay period. HMRC calls this the overriding limit. Anything above it carries forward to later pay days, and whatever is still uncollected at the year end is picked up afterwards, through Self Assessment if the person already files one.

For most owner-directors on a typical salary this will not bite, as the example above shows. It can if you take a very small salary, or none. If you get benefits but no pay at all, you still report the benefits through payroll and the company still pays the Class 1A. The tax is then collected after the year end.

The staff conversation nobody has planned

Your receptionist on private medical cover worth £1,200 a year will see £100 a month added to their taxable pay, about £20 a month less take-home for a basic rate taxpayer. Many staff have no idea that health cover is taxed at all, because it has been sitting quietly in their tax code.

HMRC goes further. Someone still paying off tax owed on a benefit from an earlier year may, from April 2027, see that and the new monthly tax at once, and HMRC says "it might appear" to them that they are "paying tax twice". It tells employers to explain this clearly and early. If you do not, expect it to land on you as a pay complaint in April.

What is still not final

This is draft guidance. HMRC says final guidance on the April 2027 benefits will line up with the Autumn Budget on 28 October 2026, with the law in the next Finance Bill. Details could still move.

There is one concession worth knowing. For the 2027/28 year, HMRC says it will not charge penalties for mistakes in how benefits are payrolled unless they are deliberate. Normal penalties for late payroll returns and late payment still apply.

Why this tidies up your add-backs

When you sell, a buyer rebuilds your profit and adds back the perks you take that a new owner would not need, such as your car and your own health cover. Those add-backs push up your SDE, the profit figure most small businesses are priced on, but only if you can prove them. From April 2027 every one of them sits, month by month and person by person, in payroll records HMRC already holds. That is cleaner evidence than a P11D filed once a year. Use it: keep a short note of which benefits are yours and which are staff costs a buyer would keep.