Benefits in Kind tax rules are changing, and employers have a duty to tell staff of their right to join a trade union
Today’s blog post covers important information for employers with regard to the tax rules around benefits in kind, and how staff need written notification of their right to join a trade union.
Mandatory payrolling of Benefits in Kind: Actions to take now
The tax rules on Benefits in Kind (BIKs) are changing. From 6 April 2027, Phase 1 of HMRC’s ‘Mandatory payrolling of Benefits in Kind and expenses’ comes into force. Phase 1 will apply only company cars, car fuel, vans, van fuel and medical benefits.
Mandatory payrolling for most other benefits will be introduced from April 2028.
Employers will need to begin preparing for the changes, which will include ensuring that payroll software and processes are correctly set up. However, to avoid employees being surprised, employers should also consider communicating the changes to their staff.
Early communication is key to making sure staff will understand how this change may affect their tax code and take-home pay.
What to explain
It would be good to help staff understand that if they currently pay tax in arrears on BIKs they will not do so from April 2027 onwards for any BIKs that are included in Phase 1.
Many employees may not realise this is how they are paying tax on BIKs, and that next year they will pay tax on their BIKs for cars, vans, fuel (for both cars and vans) and medical benefits in the year they receive them.
They may currently have a deduction in their tax code so they pay tax on an estimated benefit. This will no longer be the case from April 2027.
Tax on Phase 1 BIKs must be paid in real time in the year they are received.
What this means in practice is that some employees could end up paying tax in real time on some benefits they are receiving in 2027-28, while at the same time also be catching up with payments for any BIKs from the previous tax year. It might seem to them that they are paying tax twice. This is not the case but could be confusing if it is not explained.
Employees can be advised to contact HMRC to discuss options based on their circumstances if this overlapping taxation causes them hardship.
Should you have queries or need advice on payroll or BIKs, please get in touch. We’d be glad to help.
Mileage allowances changed for tax year 2026-27
HMRC have reminded businesses that the Approved Mileage Allowance Payments (MAPs) have been updated for the 2026-27 tax year. Rates have:
- Increased to 55p per mile for the first 10,000 miles.
- Remained at 25p per mile after 10,000 miles.
These changes are backdated to 6 April 2026.
If you reimburse your employees at or below the approved MAP rate, you may want to increase the amount you reimburse your employees for business mileage, in line with the new approved MAP rates.
Reimbursement?
If you paid your employees mileage payments above the old rates, Income Tax and/or Class 1 National Insurance contributions may have been deducted that may no longer be due.
If so, you can correct the payroll for previous months so that overpaid tax and both employers’ and employees’ Class 1 National Insurance contributions can be refunded.
If you need any help in doing this, please feel free to get in touch. We’d be happy to help you!
New trade union rules
From October 2026, companies will have to comply with new rules on trade unions introduced as part of the Employment Rights Act.
Companies need to be attentive to the rule changes. Employers will have a duty to tell workers of their right to join a trade union and will need to give them a written statement setting out this right. This applies even if the workplace is already unionised.
These changes could also mean a review of current Human Resource materials for employees both new and existing.
Employers also need to be careful that language in documentation or from managers could be seen as discouraging or discriminating against union membership.
Zero-hour contracts
The government had previously issued its consultation on the future of zero-hours contracts. Its main proposals include giving employees the right to guaranteed hours, where the number of hours offered reflects the hours worked by a qualifying worker during a reference period.
There needed to be reasonable notice of shifts and changes to these, along with payment for shifts cancelled, curtailed or moved at short notice.
Although these measures have not yet taken effect and the government awaits one last consultation, the proposals indicate policy.