Employment tax update - April 2026

This bulletin follows the release of the March Agent Update (Issue 141). In this issue we cover the content most relevant to employment taxes and reward activities.

The official rate of interest from 6 April 2026

• The official rate of interest (ORI) will remain at 3.75% from 6 April 2026.
• As announced at Autumn Budget 2024, the ORI will now be reviewed quarterly to assess whether it should be increased, decreased or maintained. Any adjustments will take effect on 6 April, 6 July, 6 October and 6 January. 

PAYE responsibilities in labour supply chains

• As noted in our previous agent updates, significant changes to tax responsibilities will come into effect for labour supply chains that include umbrella companies.
• If HMRC find that an umbrella company has not paid the correct amounts of income tax, student loan repayments and national insurance contributions, HMRC may seek to recover any underpayments from the agency or the end client.
• To help businesses prepare, HMRC has published guidance on these changes to umbrella company rules and updated the Employment Status Manual. This provides details on how the changes will tackle non-compliance in the umbrella company market, and what this means for businesses.
• Businesses can also register to watch the recorded webinar on “labour supply chains featuring umbrella companies”.

Aligning PAYE notification with OWR

• Employers with employees who qualify as new residents and are eligible for Overseas Workday Relief (OWR) can complete a PAYE notification form to notify HMRC that they will only apply PAYE to a percentage of a globally mobile employee’s income (previously known as a section 690).
• As OWR is subject to a limit, being the lower of 30% and £300,000 of the employment income, HMRC is making changes to the PAYE notification to make sure that the in-year relief claimed on the PAYE notification form for globally mobile employees does not exceed 30% of the employment income.
• This change applies to PAYE notifications for the 2026/27 tax year onwards. It does not apply to employees who are subject to transitional provisions for OWR.
• As the notification process for globally mobile employees has changed from April 2025, let us know if you need any help with navigating the new process. 

Improvements to employer PAYE online service

• HMRC will be updating the employer PAYE service with a new credit allocation page. This feature will closely resemble HMRC’s current “payment history” page, displaying where credits have been allocated to.
• However, the new credit allocation page will display where the credit arose, as well as the allocation of credits in detail. The new feature will go live before the end of the 2025/26 tax year.