National Living Wage and National Minimum Wage

From 1 April 2027, all rates increase by 3.9%: the National Living Wage to £13.21 per hour, the 18–20 rate to £11.27, and the 16-17 and apprentice rate to £8.31. The accommodation offset rises to £11.53 per day. The government has accepted the Low Pay Commission’s recommendations in full.

Impact:
Beyond the direct cost, increases of this size tend to compress pay differentials for supervisory roles, creating pressure further up the pay structure. They also bring more workers close to the minimum, where compliance risk is greatest: salary sacrifice arrangements, deductions for uniforms or accommodation, and unpaid working time such as travel between assignments or training can all take pay below the minimum.
We recommend reviewing pay bands and any salary sacrifice arrangements for lower-paid staff ahead of April 2027, and budgeting for the associated employer NIC.

Mandatory payrolling of benefits in kind

Payrolling of company cars, vans, fuel and medical benefits becomes mandatory from 6 April 2027. All remaining benefits will follow from 6 April 2028.

Impact:
For employers still reporting on forms P11D, this is a substantial operational change. Benefit values will need to be calculated and processed through payroll in real time, so data from fleet, insurance and benefits providers must reach payroll promptly and accurately.
HMRC’s published design indicates that Class 1A NIC will also move to in-year reporting and payment, which will bring forward the cashflow cost compared with the current 22 July payment date. Employees will also see benefit-related tax reflected in each payslip, which warrants clear communication.
We suggest using 2026/27 to audit benefits data, confirm payroll software readiness and consider whether to register for voluntary payrolling ahead of the mandatory start (registration must be made before the start of the relevant tax year).

Image rights

The measure announced at Autumn Budget 2025, confirming that image rights payments connected to an employment are taxable as employment income, is deferred by one year to 6 April 2028.

Impact:
This is relevant principally to sport, media and entertainment employers. Where image rights payments are made alongside an employment contract, they are likely to fall within PAYE and Class 1 NIC from April 2028.
The additional year allows contracts to be reviewed and the cost impact modelled, including for arrangements expected to run beyond that date.

Termination payments

The government will clarify the legislation on the tax treatment of termination payments, with effect from today. Detail will follow in Finance Bill 2026-27.

Impact:
As the change takes effect from today, settlements currently being negotiated may be within scope. We will review the draft legislation when published and will contact clients where we expect it to be relevant.

Mileage allowance rates

The temporary 55p per mile rate for the first 10,000 business miles in a car or van is made permanent. The rate for mileage above 10,000 miles increases from 25p to 35p from 6 April 2027.

Impact:
This is the first increase to the higher-mileage rate since 2011. Employers currently paying 45p can increase payments to 55p without a tax charge for employees, and employees paid less than the approved rates can claim Mileage Allowance Relief on the shortfall.
For NIC, the disregard has historically been calculated at the first-10,000-mile rate for all business miles; we await HMRC’s confirmation of how the new rates apply for NIC purposes. The announcement refers to cars and vans only.
Employers with significant business mileage, for example in care, field services or construction, may wish to review mileage policies, weighing cost against recruitment and retention.

Company car tax and van benefit

Company car appropriate percentages for 2030/31 will rise by one percentage point across all bands, subject to the 40% maximum. Zero-emission cars move from 9% to 10%, and cars emitting 1–50g CO2/km from 19% to 20%.
The van benefit charge and car and van fuel benefit charges will rise in line with CPI from 6 April 2027.

Impact:
Electric vehicles remain significantly more tax-efficient than petrol and diesel alternatives, and the certainty out to 2030/31 helps with fleet procurement and lease decisions being made now.
The heading of the Budget measure also refers to “potential for ULEV SalSac reforms”, although no detail has been published. Ultra-low emission cars are currently excluded from the optional remuneration rules, which underpins the popularity of electric vehicle salary sacrifice schemes.
Employers introducing or renewing such schemes may wish to ensure arrangements can be reviewed should the rules change. We will report further once more detail is available.

Employment expenses claims

From 6 April 2028, the £2,500 threshold above which employees must use Self Assessment to claim relief for unreimbursed employment expenses will be removed. Around 160,000 employees will be able to claim through PAYE instead, with more claims subject to evidence before relief is given.

Impact:
This is a simplification for employees, although the emphasis on evidence reflects HMRC’s continuing focus on incorrect expenses claims. Employers may receive more requests from staff to confirm that costs have not been reimbursed.
It is a good opportunity to check that expenses policies reimburse legitimate business costs directly, which is generally simpler for both employer and employee.

Benchmark and overseas scale rates

From April 2028, the benchmark scale rates for domestic travel and subsistence will be updated to reflect current costs. The overseas scale rates will be simplified, replacing the destination-specific rates with a tiered approach.

Impact:
The domestic rates have been largely unchanged for many years, so modernisation is welcome. A tiered overseas system should materially reduce the administration involved for employers with internationally travelling staff.
Employers using bespoke rates agreed with HMRC should review them once the new rates are published.

No new changes were announced to pension salary sacrifice; the previously announced cap remains. The two-year rule on lump sum death benefits is removed for payments made on or after today.

Immigration costs

Where an employer pays the Immigration Skills Charge or a Certificate of Sponsorship fee, the payment will not be a taxable benefit in kind, for payments on or after 28 October 2026.

Impact:
This removes uncertainty for sponsoring employers, with no reporting or payrolling required for these costs.
Employers that have treated such payments as benefits should review their position.

Visa changes

From spring 2027, occupation-specific minimum salary thresholds for sponsored workers will fall from the median to the 25th percentile of wages, with thresholds updated annually. The highest-skilled sponsored workers will be given up to six months to find a new role when their employment ends, from 2027.
The High Potential Individual visa is extended to graduates of the top 150 global institutions, and the Graduate visa extends to two years for graduates of high-compliance universities.

Impact:
Lower salary thresholds should widen the range of roles that can be sponsored, particularly outside London and the South East.
The longer curtailment period gives employers more time to recruit skilled sponsored workers leaving other businesses.

Residence-based regime, trusts and US LLCs

There are no changes to the residence-based regime that replaced the non-dom rules, including the four-year foreign income and gains regime and overseas workday relief. However, the Government will continue to assess whether the regime strikes the right balance between competitiveness, fairness and the public finances, drawing on emerging evidence next year, and has signalled that it is willing to act.
Two targeted measures are aimed at internationally mobile individuals:

• An easement to the capital gains tax exit charge for trusts affected by trustee migration, from today
• A new mechanism to relieve double taxation for UK investors in US limited liability companies and similar entities, expected from early 2028

Impact:
The regime is stable for now, but the Government’s language suggests further review in 2027. Employers planning inbound assignments or senior relocations should factor this into planning.
The US LLC measure addresses a long-standing problem for US individuals relocating to the UK, which has been a recognised barrier to inbound talent.

• PAYE direct debit: from April 2029, employers must set up a direct debit for PAYE liabilities. Other payment methods may be used before a cut-off date, with the direct debit collecting any unpaid balance
• Debt recovery: from July 2029, HMRC will be able to recover lower-value tax debts directly from the bank accounts of individuals and companies who can pay but repeatedly fail to do so, subject to a Code of Practice
• Correcting errors: from 1 April 2028, there will be new requirements around the correction of returns impacting taxpayers where inaccuracies are identified.
• Resources and powers: HMRC will recruit 670 further compliance officers by 2029/30 and modernise its information and inspection powers. Consultations are expected on offshore penalties and on tackling tax avoidance
• Making Tax Digital: those joining MTD for income tax in April 2027 will not receive penalty points for late submission of their first four quarterly updates

Impact:

The direction of travel is clear: earlier payment, more data and more compliance resource.
For employers, the new duty to correct errors is likely to extend to payroll and benefits reporting, so processes for identifying and correcting PAYE and NIC errors promptly are increasingly important.
Direct debit collection will also require finance teams to manage PAYE cash flow and payment timing carefully.

The Budget confirms that the Government will legislate so that non-compete clauses in employment contracts are no longer a barrier to hiring by start-ups and scaling businesses, and do not prevent workers in the wider economy from moving jobs. The reforms will apply across the whole economy.

The Government will also consult shortly on the wider use of restrictive practices, stating that it intends any action to be proportionate, evidence-based and to protect intellectual property.

A detailed position will be set out in early 2027, ahead of legislation.

Impact:
The scope of the reform is not yet known. It is unclear whether it will take the form of an outright ban, a statutory limit on duration or a restriction based on pay or role, or whether existing contracts will be affected.

The reference to “wider restrictive practices” suggests the consultation may also look beyond non-competes, potentially to non-solicitation and non-dealing covenants and to garden leave. Sectors that rely on non-competes to protect client relationships and know-how, including technology, financial services and professional services, are likely to be most affected.

If non-competes become harder to rely on, employers are likely to place greater weight on other protections, such as longer notice periods with garden leave, robust confidentiality and intellectual property provisions, and share incentives with vesting and leaver terms that encourage retention.

Each carries its own employment tax treatment. Garden leave pay is taxable as earnings in the normal way, payments made in return for restrictive undertakings are taxed as employment income and subject to Class 1 NIC, and leaver provisions in EMI and other share arrangements need to be drafted carefully to preserve tax-advantaged status.

We recommend that employers identify where non-competes are currently used and how important they are, but do not rewrite contracts until the detailed proposals are published.

We will review the consultation when it is issued and would be happy to discuss the employment tax implications of any alternative arrangements.