UK
Ireland
Autumn Budget 2026: Payroll and employee incentives
The 2026 Budget contained few significant employment tax announcements, with the measure likely to have the widest impact on employers being the increase to National Minimum Wage and National Living Wage rates that had already been announced.
The government also confirmed its plans for the mandatory payrolling of benefits and announced reforms to the process for claiming employment expenses. Together, these measures reflect the move towards a more streamlined and digital approach to employment tax administration.
You can read more detail on these and other Budget announcements below.
Detailed analysis
Benefits in kind
Mandatory payrolling of benefits is set to go ahead from 6 April 2027, with most taxable benefits needing to be reported from this date.
Summary
The government confirmed that long-awaited legislation will be introduced in the Finance Bill 2026/27 covering the mandatory payrolling of benefits from 6 April 2027. As previously confirmed, company cars and vans, car and van fuel, and medical benefits are required to be reported through real time information (RTI) submissions from 6 April 2027. Other taxable benefits will need to be reported through payroll from 6 April 2028, excluding beneficial loans and employer-provided living accommodation.
The government also confirmed the following increases for calculating benefits in kind in 2027/28:
The van benefit charge will be £4,310 in tax year 2027/28
The van fuel benefit charge will be £825 in tax year 2027/28
The car fuel benefit charge multiplier will be £30,200 in tax year 2027/28
All appropriate percentages for company car tax rates will increase by 1% in 2030/31 (with the maximum appropriate percentage increasing to 40%).
Our comment
Following multiple delays, mandatory payrolling of benefits will finally go ahead from 6 April 2027. Although not all taxable benefits need to be reported from April 2027, the benefits that must be reported via RTI include the common benefits employers currently report on Form P11Ds.
While other benefits can still be reported on Forms P11D, many employers will need to ensure that they have a process in place for payrolling benefits from April 2027 and for communicating to their workforce how this will operate in practice.
Increases to tax-free expense reimbursement rates
Long overdue increases to employee expense reimbursement rates have been confirmed, with the 55p mileage rate for own-car business journeys made permanent. HMRC’s benchmark scale rates are also being increased from 2028/29.
Summary
The government confirmed multiple increases to expense reimbursement rates:
The temporary increase, from 45p to 55p, for the reimbursement of business mileage undertaken in an employee’s own car will become permanent
The 25p rate for employees driving more than 10,000 miles in a tax year will also be increased to 35p from 6 April 2027
The rates for employers reimbursing employee subsistence expenses, using HMRC’s domestic benchmark scale rates, will be increased with effect from 6 April 2028. The new rates will be £20 for periods of travel over five hours, £60 for over ten hours and £75 for over 24 hours
HMRC’s overseas scale rates will also be simplified with effect from 6 April 2028, replacing the 200+ rates for individual locations with a tiered approach
Our comment
Increases to these rates will be welcome news for employees given the additional cost pressures when travelling on business.
That said, it may be frustrating for some employees and employers that the significant increases to HMRC’s subsistence rates will not take effect until the 2028/29 tax year. This may mean more employers decide to reimburse subsistence expenses on a receipted basis or try to agree a bespoke scale rate with HMRC to support their employees with the rising costs incurred when travelling on business.
National Minimum Wage
From 1 April 2027, the National Minimum Wage (NMW) and National Living Wage (NLW) rates will increase by 3.9%. The NLW will rise to £13.21 per hour.
Summary
The Chancellor announced that the government had fully accepted the Low Pay Commission’s recommendations, resulting in a further increase to NMW rates. This means that, for pay reference periods beginning on or after 1 April 2027, the following rates should be applied by employers:
NLW for those aged 21 years and over – £13.21 per hour
NMW for those aged 18-20 years – £11.27 per hour
NMW for those aged 16 or 17 years – £8.31 per hour
NMW for individuals completing an apprenticeship who are aged under 19 years or aged 19 years or over and in the first year of their apprenticeship – £8.31 per hour
Our comment
Given that the government was expected to raise NMW rates for younger workers towards a single NMW rate for all ages, in line with its manifesto pledge, this more limited increase should be welcome news for employers.
While many employers are used to NMW rates increasing annually in April, the upcoming increase in April 2027 also coincides with the NMW enforcement teams moving from HMRC to the Fair Work Agency. It has been confirmed that enforcement activity will continue in line with HMRC’s previous approach, but we expect this will bring increased enforcement activity and a renewed focus on NMW and wider areas of employment rights, including holiday pay and statutory payments.