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Payroll Hub · Simple employer guide

How to prepare private medical benefits for payroll

A practical guide to the costs, dates and employee payments you need before April 2027.

Best for: Business owners and people working in payroll, finance or HR

  • Plain-English guide
  • Reviewed 11 August 2026

In simple terms

Status: HMRC interim guidance

Employer-paid medical insurance is included in the first group of benefits moving into payroll from 6 April 2027. Ask your provider for a cost for each covered employee, record when cover starts or ends, and note anything the employee pays towards it. Payroll can then spread the taxable amount across the year.

How is a medical benefit valued?

For many schemes, start with the cost of providing cover for that employee and subtract any qualifying amount they paid themselves. Salary-sacrifice or flexible-benefit arrangements can need extra care, so ask your adviser or payroll provider if they apply.

What happens if the premium changes?

Tell payroll as soon as possible. Payroll should work out the revised value, take account of what has already been included, and adjust the remaining pay periods instead of starting again.

Status: Illustrative Workmax example

Illustrative medical-benefit allocation

A fictional annual premium is £1,200 and the employee is paid monthly for all 12 pay periods.

£1,200 ÷ 12 = £100 per pay period

Result: £100 included as a taxable benefit in each monthly payroll

Optional detail

Official guidance behind this answer

The short answers above are enough to get started. Open these sections only if you need to check the current HMRC position or source.

What Benefits in Kind must be payrolled from 6 April 2027?

Status: HMRC interim guidance

From 6 April 2027, HMRC says employers will need to put company cars, car fuel, vans, van fuel and employer-provided medical benefits through payroll.

Read the full answer and official source

These are the first five benefit groups in the change. HMRC currently plans to add most other Benefits in Kind from April 2028, while loans and accommodation will continue to have separate arrangements.

Source: HM Revenue and Customs — The phased introduction of mandatory payrolling for benefits in kind

Source updated: . Workmax reviewed: .

How will Class 1A National Insurance contributions work from April 2027?

Status: HMRC interim guidance

HMRC’s current plan is for employers to report and pay Class 1A National Insurance on affected benefits through payroll from April 2027. Class 1A is an employer cost, not an employee deduction.

Read the full answer and official source

Employers should budget for a possible overlap in 2027: the final annual payment for 2026/27 may fall due while the new in-year process has already started.

Source: HM Revenue and Customs — Reporting Class 1A National Insurance contributions

Source updated: . Workmax reviewed: .

Plain-English Benefits in Kind glossary
Benefit in Kind (BiK)
A non-cash benefit or expense provided by an employer that may create an Income Tax liability.
Payrolling benefits
Including a benefit's taxable value in payroll so Income Tax is collected through PAYE.
Cash equivalent
The statutory taxable value of a benefit, which may differ from its purchase price or cash cost.
Class 1A NIC
An employer National Insurance liability charged on many taxable benefits and expenses.
P11D
The end-of-year form traditionally used to report taxable expenses and benefits for an employee.
FPS
The Full Payment Submission employers send through Real Time Information when payroll is reported to HMRC.
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