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.

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.

A publishing deal relates to the songwriting rights in a piece of music, including the composition and lyrics, while a record deal relates to the sound recording itself, often called the master recording.
This distinction matters because different copyrights generate different income streams. A single song can produce publishing income from songwriting rights and recording income from the master recording. Understanding which rights are covered by each agreement is essential before signing any contract.

Yes. Many songwriters have publishing deals without ever signing a record deal.
A publisher’s focus is on exploiting and administering the underlying songs, collecting royalties, and creating commercial opportunities such as sync placements or co-writing arrangements. This is common for professional songwriters who write for other artists, as well as independent artists who choose to self-release their recordings while retaining control of their master rights.

Publishing income is generated when songs are performed, streamed, reproduced, broadcast, licensed, or used commercially.
Common sources include performance royalties, mechanical royalties, synchronisation fees, and international royalty collections. The exact income available will depend on how the music is used, where it is exploited, and whether the relevant rights have been properly registered and administered. Effective royalty collection is often an important part of maximising the long-term value of a catalogue.

It depends on the terms of the agreement.
Some publishing arrangements allow the songwriter to retain ownership while granting administration rights to the publisher. Others involve assigning part or all of the copyright for a specified period, territory, or contractual term. Before signing, it is important to understand exactly which rights are being transferred, how long the arrangement lasts, and whether rights can revert in the future.

In many cases, advances can create accounting and tax consequences, but the treatment depends on the specific circumstances and structure involved.
Factors such as whether income is received personally or through a company, the timing of recognition, overseas royalties, withholding taxes, and VAT considerations can all affect the outcome. Artists should seek professional advice before spending a significant advance to avoid unexpected tax liabilities or cashflow issues later.

Recoupment is the process by which a record label or publisher recovers an advance from future royalty income.
This means that an artist or songwriter may not receive additional royalty payments until the advance and any agreed recoupable costs have been recovered. Different contracts can have very different recoupment provisions, including rules around deductions, cross-collateralisation, and reporting. Understanding these clauses is often just as important as the size of the advance itself.

No. The largest advance is not necessarily the most valuable long-term arrangement.
An attractive upfront payment may be accompanied by lower royalty rates, broader rights transfers, longer contract terms, or more extensive recoupment provisions. Artists should assess the overall commercial package including ownership, control, future earning potential, and flexibility, rather than focusing solely on the initial payment.

Not always, but many independent artists can benefit from professional publishing administration.
A publisher may help register works with collection societies, collect royalties from multiple territories, identify sync opportunities and manage copyright administration. For artists with growing catalogues or international audiences, publishing support can help improve royalty collection and reduce administrative burdens, even if they remain independent from a record label.

Synchronisation rights, often called sync rights, allow music to be licensed for use in films, television programmes, advertisements, video games and online content.
A successful sync placement can generate licensing fees, performance royalties, and wider exposure for both the song and the artist. For many songwriters and rights holders, sync opportunities have become an increasingly important source of music industry revenue and catalogue growth.

Yes. International royalty income can create additional reporting and tax requirements.
Artists and songwriters may need to consider overseas withholding taxes, foreign income reporting, double tax relief claims and available tax credits. The position can become more complex where income is received from multiple territories or through different business structures. Obtaining advice early can help ensure compliance and reduce the risk of paying more tax than necessary.

A common misconception is that a publishing deal and a record deal are effectively the same thing.
In reality, they cover different rights, different sources of income, and different commercial relationships. A record deal focuses on exploiting recordings, while a publishing deal focuses on exploiting songs and songwriting rights. Because both rights can generate income from the same piece of music, artists often have both types of agreement operating alongside one another.

Ideally, advice should be sought before any agreement is signed.
Early advice can help artists understand royalty structures, recoupment mechanics, ownership provisions, international tax exposure, VAT obligations, cashflow implications and the suitability of their business structure. This is particularly important where advances, overseas income, multiple revenue streams or long-term rights transfers are involved.

Yes. HMRC may open an enquiry or compliance check even where a taxpayer believes they have filed accurately. Enquiries can arise from routine risk assessment, sector-wide campaigns, data matching exercises, third-party information, or unusual entries in a return. Receiving a letter does not automatically mean HMRC believe wrongdoing has occurred. However, it is important to take the contact seriously, understand precisely what HMRC is reviewing, and respond appropriately within the required timeframe.

The length of an HMRC enquiry depends on its complexity, the quality of records available, and how quickly information is provided. Straightforward enquiries may be resolved within a few months, while complex investigations involving multiple tax years, offshore matters, property transactions or director loan accounts can continue for significantly longer. Clear documentation, timely responses and proactive issue resolution can often help bring matters to a conclusion more efficiently.

If HMRC identify an error, the outcome will depend on the nature of the mistake and how it arose. Tax may need to be repaid together with interest, and penalties may apply. In many cases, penalties can be reduced where taxpayers cooperate fully and make prompt, accurate disclosures. A structured review of the underlying issue before responding to HMRC can help ensure any corrections are handled appropriately and consistently.

Yes. HMRC have wide powers to request information, but requests must generally be relevant, proportionate and supported by the appropriate legal framework. Businesses are not necessarily required to provide information that falls outside the scope of a valid request. Where a request appears overly broad or unclear, it may be appropriate to seek clarification, discuss its scope, or consider available appeal rights. Professional advice can be particularly valuable in these situations.

These terms are often used interchangeably, but they can refer to different stages or forms of HMRC activity. An enquiry typically involves reviewing a tax return, while a compliance check may extend to reviewing records, systems or specific transactions. More serious investigations may involve suspected avoidance, offshore issues or allegations of deliberate behaviour. Understanding the type of contact received helps determine the urgency of the situation and the most appropriate response strategy.

Contact HMRC before the deadline expires. In many cases, reasonable extensions can be agreed where there is a genuine need for additional time, such as gathering records or obtaining professional advice. Missing deadlines without communication can increase the risk of penalties, formal notices and escalation. Early engagement generally demonstrates cooperation and helps maintain a more constructive dialogue with HMRC.

No. An HMRC enquiry does not automatically result in penalties. Many enquiries are resolved with no additional tax liability or penalty assessment. Penalties are more likely where HMRC identify errors, omissions, failures to comply with information requests, or evidence of careless or deliberate behaviour. The way a taxpayer responds during the enquiry may also influence the level of any eventual penalty.

Specialist support should be considered as early as possible where substantial tax amounts are involved, multiple tax years are under review, complex business structures are affected, or HMRC raise concerns relating to offshore matters, property transactions, director loan accounts or suspected fraud. Early professional involvement can help manage communications, assess technical risks, protect taxpayer rights and reduce the likelihood of the enquiry expanding unnecessarily.

Yes. Although an enquiry may begin with a company, HMRC may review matters connected to directors where relevant, including remuneration arrangements, benefits, expenses, share transactions, loans to participators and personal tax returns. Directors should therefore ensure that both corporate and personal tax records are accurate, consistent and properly supported by documentation.

In most circumstances, early disclosure is preferable where a genuine error has been identified. Voluntarily raising an issue, providing a clear explanation and cooperating with HMRC can help demonstrate good faith and may reduce the level of penalties compared with allowing HMRC to discover the matter independently. The most appropriate disclosure approach will depend on the specific circumstances and the stage the enquiry has reached.

Taxpayers have the right to understand what HMRC is checking, why information is being requested and what legal powers are being relied upon. They may also challenge certain requests, appeal decisions where appropriate and, in some circumstances, use alternative dispute resolution (ADR) to help resolve disagreements. Understanding these rights is an important part of achieving a fair and proportionate outcome.

Some areas are naturally subject to greater scrutiny because they involve higher tax risk or more complex rules. Examples can include property transactions, cash-intensive businesses, international activities, off-payroll working arrangements, businesses with director loan accounts and cross-border tax matters. Businesses operating in these areas should ensure that record-keeping, reporting and compliance processes are particularly robust.

A demerger separates an existing company or group into two or more independent businesses. In many cases, the same shareholders continue to own the newly separated entities, although demergers can also be used where different shareholders take ownership of different parts of a business. This can help resolve succession issues, shareholder disputes, differing growth strategies, or plans to separate distinct business activities. The exact structure will depend on the group’s objectives, ownership arrangements and tax position. Based on the circumstances, a statutory or non-statutory demerger may be considered.

Possibly, but the position depends on the type of demerger and the facts of the case. Statutory demergers are generally subject to conditions that prevent them being undertaken in contemplation of a sale. Non-statutory demergers have historically offered more flexibility, it is strongly recommended that HMRC clearance is sought and HMRC may reject clearance if a demeregr is linked to future sale. The Government’s consultation from June-September 2026 proposed changes that could significantly affect how demergers connected to sales are undertaken in future.

HMRC clearance is a formal process used to obtain confirmation that certain tax anti-avoidance provisions should not apply to a proposed transaction. For demergers, obtaining clearance can provide greater certainty over the intended tax treatment before implementation.

Property investment companies could be among the businesses most affected. Statutory demergers
It is unlikely that the proposed changes will prevent a property investment company from demerging. However, there may be less flexibility where the demerger is in contemplation of a sale of cessation of the business.

A demerger is often used to facilitate an orderly separation where shareholders have different commercial goals. This may arise following a dispute, management succession, family ownership transitions or inherited businesses where individual shareholders want to pursue different strategies. Separating the business into standalone entities can allow each party to operate independently while potentially avoiding the disruption that a full sale or winding-up might create.

Most company business separations can be completed tax-efficiently provided relevant conditions are met including specific legislative requirements, qualifying for particular reliefs, or obtaining HMRC clearance where appropriate. The structure, ownership, business activities and future plans for the company can all influence the availability of relief.

Businesses considering a demerger may wish to assess their options sooner rather than later. HMRC’s consultation is exploring changes that could remove or restrict some currently available routes, particularly certain non-statutory capital reduction demergers. While no final rules have yet been confirmed, businesses with active succession plans, shareholder separation discussions or potential transaction activity may benefit from reviewing their position before any reforms are introduced.

If you are looking to split your business – either by creating separate groups owned by the existing shareholders, or by splitting the business between shareholders – you should seek professional tax advice on how the split can be achieved without significant tax arising. You will also need a lawyer to advise on legal issues and to implement the split.