Making tax digital and real-time benefits reporting: What UK businesses need to know for 2026–2027

This new digital reporting replaces the traditional P11D process with mandatory digital compliance. ABAX explains what’s changing and how fleet operators and payroll teams should prepare. 

What is Making Tax Digital (MTD)? 

Making Tax Digital (MTD) is HMRC’s programme to move the UK tax system to mandatory digital record-keeping and software-based reporting. 

Under MTD rules, affected taxpayers must: 

• Keep digital records 

• Use compatible software 

• Submit information to HMRC electronically 

From April 2026, Making Tax Digital for Income Tax will apply to self-employed individuals and landlords with qualifying income over £50,000, with expansion planned thereafter (HMRC, Making Tax Digital campaign guidance). 

MTD already applies to most VAT-registered businesses. 

Is HMRC changing how company cars and benefits in kind are reported? 

Yes, HMRC has confirmed that it will mandate the reporting of Benefits in Kind (BiKs) and expenses through payroll software, replacing the traditional P11D process, this includes company cars.  

Under current rules: 

• Employers submit P11D forms annually after the tax year ends. 

Under the new system: 

• Benefits such as company cars will be reported using Real Time Information (RTI) payroll submissions 

• Income Tax and Class 1A National Insurance will be handled through payroll 

• Reporting will move to a mandatory digital framework 

HMRC has confirmed the implementation date for mandatory payrolling of benefits is April 2027, giving employers more time to prepare.  

What does “real-time reporting” mean for employers? 

Real-time reporting means: 

• Benefits are reported to HMRC through payroll submissions during the tax year 

• Tax is calculated and collected via PAYE 

• End-of-year P11D reporting is reduced or removed 

HMRC guidance confirms the shift toward mandatory payrolling of benefits in kind through RTI. 

Why does this matter for fleet operators and company car schemes? 

Company cars are one of the most common taxable benefits in the UK.  

When BiK reporting becomes mandatory through payroll: 

• Payroll systems must hold accurate vehicle data 

• Employers must maintain reliable benefit values 

• Reporting errors may affect PAYE calculations in real time 

This increases the importance of: 

• Clean digital records 

• Accurate vehicle allocation data 

• Integrated payroll workflows 

At ABAX, we are actively helping customers review their compliance readiness in light of HMRC’s digital transformation programme. 

We do not replace payroll providers - but we ensure that vehicle data and usage information can be managed clearly, consistently and in a format suitable for modern digital compliance. 

When do these changes take effect? 

Source: 

• Making Tax Digital

Key takeaway 

Making Tax Digital is not just about VAT. It is part of a broader HMRC strategy to modernise tax reporting -including how company cars and other employee benefits are reported. 

Businesses with fleets or employee vehicle schemes should begin reviewing their digital readiness now. 

ABAX will continue monitoring official HMRC guidance and legislative updates to ensure our customers stay informed and compliant.