Ensuring you’re aware of upcoming employment tax and wider changes will help to ensure that you're prepared for year-end reporting for the 2025/26 tax year as well as upcoming changes for the new tax year.
The Chancellor’s Autumn Statement 2025 confirmed that Income Tax and National Insurance thresholds will remain frozen in 2026 until 2031, continuing the impact of fiscal drag. Although headline tax rates will not change, several measures affecting employers and employees were confirmed, along with continued HMRC scrutiny of employment tax compliance.
Details of further announcements and their potential impact on employers can be found here:: Autumn Budget 2025 response.
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From 6 April 2026, reimbursements for eye tests, flu jabs and homeworking equipment will be exempt from income tax, aligning the treatment with direct employer provision. These changes may simplify administration for employers, including supporting hybrid or remote working arrangements. Whilst this will not affect PSA reporting for the 2025/26 tax year, it will do so going forward.
The requirement to report non-cash benefits via the payroll will become mandatory from 6 April 2027, removing the requirement for P11D reporting, with income tax as well as Class 1A NIC collected via the payroll every pay period.
Employers may wish to start payrolling benefits one year earlier and to do so will need to register with HMRC prior to end of 2025/26 tax year (by 5 April 2026). Note that P11D(b) reporting along with the payment of Class 1A NIC will remain due after the tax year until the change from April 2027 for the 2027/28 tax year. In addition, the following cannot be payrolled until the 2027/28 tax year:
• employer provided living accommodation
• interest free and low interest (beneficial) loans.
Employers wishing to payroll these benefits from 6 April 2027 will need to register to do so before the start of the 2027/28 tax year. The facility to do so is expected to be offered from November 2026.
While further guidance is awaited, the latest update has emphasised the need for employers to begin preparing. There will be implications for all businesses, even where employers currently payroll benefits on a voluntary basis.
Action will be needed to ensure that all benefits intended to be payrolled can be accurately valued and processed through payroll, ensuring internal controls remain robust in order to plan for a smooth transition well in advance of April 2027 so that the shift away from P11D reporting can be managed efficiently and without disruption.
The employment-related securities (ERS) annual filing requirements cover a broad range of events, and continue to catch employers out who may be unaware of their obligations in this regard.
Employers are obliged to return details to HMRC concerning, for example:
employee share and share option awards
the acquisition of other (non-share) employment related securities (eg, loan notes)
certain events relating to the award of ‘restricted securities’
share conversion events and exchanges (even where no tax charges arise)
For those unfamiliar with the requirements, HMRC won't issue a notification or reminder that a return is required. Employers are required to take specific action to first register on the PAYE online portal to make these filings.
From 6 April 2026, eligibility for Enterprise Management Incentive (EMI) schemes will expand. The changes include increased employee limits, higher company limits, and an extended maximum holding period. Employers who operate share plans should consider whether these expanded thresholds provide opportunities for future awards. More information can be found here: EMI reform 2026: What mid‑market and scale‑ups need to know.
The headline national living wage rate will rise from £12.21 to £12.71 per hour from 1 April 2026 for those aged 21 and over. Employers should ensure payroll cost forecasts and employment contracts reflect the new statutory minimums and ensure they are aware of the risks of non-compliance. National minimum wage compliance should be considered as a calculation rather than merely the payment of a rate, therefore employers should take particular care that sufficient measures are in place to ensure they don't inadvertently breach the relevant threshold. This includes making sure all working time, including overtime, is documented and paid correctly as well as any salary sacrifice arrangements. Employers should ensure that they have a robust system within their payroll, which is followed and regularly reviewed.
Compliance will also be bolstered by the establishment of the Fair Work Agency which will consolidate the enforcement of a wide range of employment rights and NMW into a single body. Although it will not create any new tax obligations, strengthened inspection and investigative powers mean that employers should expect more proactive oversight. Pay practices, statutory payments and record keeping including payroll accuracy will remain in focus, particularly in areas where employment tax and employment rights intersect. This includes minimum wage compliance, holiday pay, worker classification and treatment of statutory payments.
Employers should continue to review hybrid working policies, particularly in relation to travel expenses, homeworking payments, and crossborder working arrangements.
Whether employers are incentivising their employees back into the workplace for a greater amount of time than previously, or offering a work from anywhere remote hybrid-working policy, the employment tax reporting and costs considerations should be worked through in advance to avoid any surprises. Recommended actions may include implementing return-to-work policies and reviewing previous policies (including for travel and home-working expenses) in light of the changing workplace rules and rising costs of living. There may also be corporate risks, such as permanent establishment and corporate residency.
Tax risk management remains a priority and can be a particular headache for employers. Large businesses should be aware of the requirements placed upon them by the senior accounting officer (SAO) and Business Risk Review+ (BRR+) regimes, although ensuring that adequate controls are in place to minimise risk should be a priority for all employers. The corporate criminal offences (CCO) legislation places responsibility upon all businesses to implement procedures to prevent any associated persons from criminally facilitating tax evasion. With potentially unlimited fines for any business found guilty of the offence, it's crucial for employers to implement and regularly review their policies.
Employment tax health checks, which evaluate all of these risk areas, should be undertaken on a regular basis, and when there are changes in the business. This will allow employers to have confidence that their procedures are sufficiently robust, and that they're meeting their employment tax compliance responsibilities.
Employment status and application of the IR35 rules also remains a key governance issue for employers engaging off-payroll workers, with HMRC actively investigating compliance with the rulesas well as understanding of the associated responsibilities.
Legislation introducing joint and several liability for noncompliant umbrella companies will take effect from 6 April 2026. Agencies and end clients may become liable where umbrella companies fail to meet PAYE obligations. Employers should review labour supply chain due diligence processes accordingly.
An agreement with HMRC for an employer to settle income tax and NIC liabilities will be due on behalf of their employees on minor or irregular taxable benefits, or where it's impractical to operate PAYE, eg, staff entertainment and gifts. A PSA must be agreed with HMRC by 5 July, which is also the deadline for adding new items to a PSA for the 2024/25 tax year. For 2025, it is noted that this date falls on a weekend.
For employers providing incentive awards to employees of a third party, a TAS is an equivalent voluntary agreement to settle the income tax and NIC due which needs to be agreed and filed by 6 July 2025. For 2025, it is noted that this date falls on a weekend.
These are voluntary agreements with HMRC to relax the otherwise strict PAYE withholding requirements on payments to certain business visitors to the UK. Complex conditions must be met, but there are significant advantages in terms of risk and administration reduction. The 2024/25 STBV Report(s) must be filed by 31 May 2025.
Further details on how Grant Thornton can support with tracking and reporting of internationally mobile employees through our tailor-made Pinpoint technology can be found here: Short-term business visitors (STBV)
These are used to report taxable expenses and benefits provided to employees and report the Class 1A NIC payable by the business. Even where businesses payroll their P11D benefits, the P11D(b) must still be filed by 6 July with payment of the Class 1A NIC by 22 July. If a business wishes to formally payroll their benefits the deadline for notifying HMRC is 5 April prior to the start of the relevant tax year. Employers must also notify their employees of the change.
Payrolling will become mandatory from 6 April 2026 and there are a number of changes to be aware of and to prepare for prior to that date, even where businesses already payroll their benefits.
Employers are required to report to HMRC details of all employee/director share and share option transactions that have taken place during the tax year, whether via an employee share plan or any other arrangement. The return must be submitted annually by 6 July using the online ERS portal.
Where a ‘scheme’ has been registered with HMRC, a return must be filed with HMRC in order to avoid late filing penalties.
When the employment of an employee or director is terminated, but they continue to be provided with a taxable benefit in kind, the reporting of the benefit differs to standard form P11D reporting. Employers are required to make a report to HMRC for termination packages exceeding £30,000, which are inclusive of non-cash items. Reports must be made by 6 July following the end of the tax year.
Final payroll reports must be submitted to HMRC by 19 April 2025. Form P60s must be provided to employees (and any off payroll workers on the payroll as deemed employees under the IR35 legislation) by no later than 31 May 2025.
Employers who payroll their benefits in kind must ensure their employees have been provided with details of what has been payrolled by 1 June 2025 at the latest. The Class 1A NIC due on payrolled benefits must be included on the form P11D(b), which is due by 6 July 2025.
There are a number of other specialist employer compliance returns and reports that sit outside of the normal employer compliance timeline. They may not apply to all businesses, but where they do apply, failure to comply may bring significant penalties.
Businesses that are mainstream or deemed contractors for the purpose of CIS must submit monthly returns of payments made to subcontractors. CIS returns are due by the 19th of every month following the last tax month.
From April 2026, measures are to be introduced to tackle businesses who knowingly engage with fraudulent businesses and who evade tax. The changes to be introduced relate to the transfer of liability up the contractual chain where there it is known that there is non-compliance within the supply chain and may direct for gross payment status (GPS) to be revoked.
Businesses engaging with off-payroll workers on a self-employed basis, such as contractors via intermediaries (PSCs) as well as directly with freelancers, need to ensure they address the significant tax risks.
It's important to be able to demonstrate the taking of 'reasonable care' with onboarding contractors and have embedded systems to determine employment status in order to manage IR35 and wider risks. This includes using tools to manage employment status assessments, Grant Thornton’s well renowned Employment Status Intelligence Platform (ESIP) provides an end to end solution, please see the following for more: Employment status
The threshold at which end users need to apply the IR35 rules to engagements with intermediaries changed from April 2025, the so called “Small Company exemption” as follows
In Autumn 2025, HMRC guidance was updated to confirm that employers should apportion NIC on earnings relating to work carried out in the UK. This will affect NIC settlement returns due 31 March 2026.
HMRC confirmed in February 2026 that where an employee is covered by an STBV agreement (Appendix 4), there is no requirements for employers to report non-tax advantaged ERS data provided no UK Income Tax and National Insurance contributions would be due. This applies for all previous and future tax years.
An obligation remains in rare scenarios, such as where the STBV was previously a UK resident and share options were granted at that time.
For more insight and guidance get in touch with Jonathan Berger and our employer solutions team.
