This means that companies will not have to file benefits in kind through payroll software until April 2027, giving nearly two years’ grace to businesses.

In addition, there will be no penalties during year one of operation, except for gross abuse of the system.

The original plan was to mandate the reporting requirements from 2026, which would have increased costs for businesses to comply with updated payroll software, and invest in new systems where they did not use them.

Employers will now have until 1 April 2027 to prepare for mandatory reporting of income tax and Class 1A National Insurance contributions (NICs) on benefits in kind via payroll software, known as mandatory payrolling.