Medical benefits on the payslip from 6 April 2027

What changes on 6 April 2027

HMRC is bringing benefits in kind into payroll in two phases. Phase 1 is due to start on 6 April 2027 and cover company cars, car fuel, vans, van fuel and employer-provided medical benefits. Phase 2 is due to start on 6 April 2028 and cover most other benefits. HMRC will confirm the timing for loans and living accommodation later (HMRC, Changes to reporting of benefits in kind from April 2027).

For staff, it is not a new tax. Until now the tax on medical cover was usually collected through their tax code. From April 2027 it is due to be taken through payroll each pay period, and they will see it on their payslip.

Unless you already payroll medical benefits voluntarily, the 2026 to 2027 tax year is reported the old way: its P11D and P11D(b) are due by 6 July 2027. Benefits outside phase 1 stay on the P11D until their own phase starts.

The change is set out in draft legislation and HMRC's interim guidance, so the detail can still move. This page follows what HMRC has published so far.

Which of your benefits are in phase 1

Private medical insurance is. HMRC names employer-provided medical benefits in phase 1, and private medical insurance is the main one.

For health cash plans and dental insurance, HMRC's page does not yet say. It names medical benefits without defining them. Ask your payroll adviser how they will treat each one, and check again when HMRC publishes final guidance for phase 1.

Some health benefits are not taxable at all, so they stay out of payroll: one health screening and one medical check-up a year, eye tests for staff who use screens, and medical treatment of up to £500 a year to help someone back to work after 28 days off sick, when a health professional recommends it. Group income protection insured with a third party is not a taxable benefit either.

How the monthly figure is worked out

Payroll adds the value of the cover to the member's taxable pay each pay period, and takes the tax through PAYE in the normal way. The member sees the value as a line on their payslip: it is not money taken from their pay, it is the amount their tax is worked out on.

For medical insurance, the value for the year is what the cover costs the employer, including insurance premium tax. Anything the member pays the employer for it comes off, as long as it is paid by 6 July after the end of the tax year. Divide what is left by the pay periods in the year: twelve for monthly pay, fifty-two for weekly.

The employer pays Class 1A National Insurance at 15% on the same value. From 6 April 2027 that is due to be reported in real time through payroll too.

When your policy renews mid-year

Most medical policies do not renew on 6 April, and the premium usually changes at renewal. When it does, HMRC's method is to work out a new value for the tax year, the old cost up to the day before the renewal and the new cost from the renewal to the end of the year, then take off what has already been payrolled and spread the rest over the paydays left.

An example, with pay on the last day of each month. A member's cover costs £1,200 a year, so payroll adds £100 a month from April 2027. The policy renews on 1 October at £1,380. The value for the year is now 178 days at the old cost and 188 days at the new: £583.61 plus £708.85, so £1,292.46. The six paydays from April to September have added £600. Payroll spreads the £692.46 left over the six paydays to March: £115.41 a month. The employer's Class 1A for the year is £193.87.

The new premium has to reach payroll before the first payday after the renewal. If it arrives late, the months already run are corrected in the months left, and staff see a bigger change in one go.

What payroll needs from you each month

Once medical cover is payrolled, payroll needs the changes as they happen, not once a year. Agree now who sends them, in what form and by which day of the month:

• who joined the scheme, and from which date
• who left, and the date their cover ended
• changes to level of cover, for example single to family
• the cost for each member at each level of cover
• the new costs at renewal, before the first payday on them
• what each member pays towards the cover, if anything

Keep it as a register with one row for each member. These are the columns payroll works from:

Most of this sits with your insurer or your broker. Under the old P11D, a year of changes could be gathered in the summer. Under payrolling, a change missed this month is wrong on this month's payslip.

What to tell staff

That it is not a new tax. The cover was already taxable, and the tax was usually collected through their tax code. From 6 April 2027 it is due to be collected through payroll each pay period instead, so their tax code may change.

That a new line will appear on the payslip. It shows the value of their cover, which is added to their pay for tax and not paid to them. Their take-home pay may move a little, because the tax moves from the tax code into the pay period.

That the line changes when the policy renews, if the premium changes.

Common mistakes

• Using the old Class 1A rate. It has been 15% since 6 April 2025, not 13.8%.
• Starting to payroll medical benefits part-way through 2026 to 2027. Unless you registered to payroll them voluntarily before that year began, it goes on a P11D, due by 6 July 2027.
• Keeping last year's premium after a renewal. The value changes from the renewal, not from the next April.
• Leaving out family cover. If the employer pays for a member's partner or children, that cost is part of the member's benefit.
• Leaving what a member pays for the cover off the payroll figures. Payroll needs it as it happens, or each month carries too much tax.
• Assuming salary sacrifice makes medical cover tax-free. Under the optional remuneration rules the taxable value is the higher of the salary given up and the cost of the cover.

How the timeline is worked out

The fixed dates are HMRC's: the end of the 2026 to 2027 tax year, the start of phase 1, the P11D deadline for 2026 to 2027 and the start of phase 2. The preparation steps count back from 6 April 2027: six months, three months and one month before. Add your medical policy renewal date and it goes in at its next occurrence, because a new premium means a new value for payroll.

Questions people ask

When does private medical insurance move onto payroll?

From 6 April 2027, under the rules HMRC has published in draft. Employer-provided medical benefits are in phase 1 of mandatory payrolling, with company cars, car fuel, vans and van fuel. Unless you already payroll them voluntarily, medical benefits for the 2026 to 2027 tax year are reported on a P11D, due by 6 July 2027.

Is payrolling private medical insurance a new tax?

No. The cover was already a taxable benefit. What changes is how the tax is collected: through payroll each pay period, instead of usually through the employee's tax code.

How do we work out the monthly figure?

Take the yearly cost of the member's cover to the employer, including insurance premium tax, take off anything the member pays the employer for it, and divide by the pay periods in the year. For monthly pay, that is twelve.

What happens when the policy renews mid-year?

Payroll works out a new value for the tax year, by day: the old cost up to the day before the renewal and the new cost from it. It takes off what it has already payrolled and spreads the rest over the paydays left.

Does the employer still pay Class 1A National Insurance?

Yes, at 15% on the same value. From 6 April 2027 it is due to be reported through payroll in real time for payrolled benefits. HMRC has not yet published the detail.

What this does not tell you

The rules are in draft legislation and HMRC's guidance for phase 1 is interim, so details can change. Whether health cash plans and dental cover are payrolled from 6 April 2027 is not settled on the page we cite: ask your payroll adviser. The calculator assumes monthly pay on the last day of each month. It does not tell you anyone's tax code or take-home pay, and in Scotland the income tax rates are different.

Sources: HMRC, Changes to reporting of benefits in kind from April 2027; GOV.UK, expenses and benefits deadlines; GOV.UK, medical or dental treatment and insurance; HMRC, rates and thresholds for employers 2026 to 2027; HMRC, salary sacrifice and the effects on PAYE. Checked 29 October 2026.