Employment tax update - June 2026

This bulletin follows the release of the April and May Agent Updates (Issue 142 and Issue 143). In this issue we cover the content most relevant to employment taxes and reward activities.

Employment-related securities (ERS) update

Enterprise Management Incentives (EMI) threshold

• An increase to EMI thresholds was introduced from 6 April 2026 to allow more companies to use the scheme.
• From 6 April 2026, the EMI limits increased as follows:
  • the maximum value of company options – from £3m to £6m;
  • the maximum value of gross assets - from £30m to £120m;
  • the number of employees - from fewer than 250 to fewer than 500; and
  • the maximum holding period - from 10 years to 15 years.
• Where the employer is a specified company, the limits increase and extended period will not apply. A specified company is a company with its registered office in Northern Ireland which trades in goods or provision of electricity.
• The extension of the holding period can in certain circumstances be applied retrospectively to existing contracts.

ERS reporting for short-term business visitors

• Where an employee is a short-term business visitor who is covered by an Appendix 4 arrangement, HMRC will no longer require companies to report non-tax advantaged ERS data for these employees, provided no UK income tax and National Insurance contributions (NICs) would be due.
• This applies for all previous and future tax years. The ERS reporting obligation remains in rare scenarios where UK income tax and NICs would be due, such as where the short-term business visitor was previously a UK resident and share options were granted at that time. 

ERS reporting reminder

• If an employer operates equity incentive schemes, they must file an end of year ERS return.
• For tax year 2025/26, the ERS return must be submitted on or before 6 July 2026. If this deadline is missed, HMRC will issue a late filing penalty.
• If no reportable events occurred during the tax year, a nil return must be submitted. 

Reporting of benefits in kind (BIKs)

Forms P11D and P11D(b)

• For those employers who do not yet payroll expenses and benefits, or who provide living accommodation or employment-related loans, the deadline for reporting P11D BIKs and Class 1A NICs on P11D(b)s for the 2025/26 tax year is 6 July 2026.
• Class 1A NICs must be paid to HMRC by 22 July 2026.
• All P11Ds and P11D(b) for the tax year must be filed online and at the same time. Late submission may result in a penalty. HMRC charge penalties on a monthly basis and issue penalty notices each quarter until a return is received. 

Payrolling of BIKs

• The payrolling service for BIKs closed for registration for the 2026/27 tax year on 5 April 2026.
• Employers must have registered by 5 April 2026 in order to payroll BIKs for the 2026/27 tax year. No new registrations to payroll BIKs can currently be accepted. Employers who did not register in time will have to report BIKs provided to employees during 2026/27 on forms P11D due by 6 July 2027. 

Relief for homeworking expenses and workplace benefits

Homeworking expenses

• From 6 April 2026, the Government removed the process in which employees can claim a deduction from income tax from HMRC if they have incurred additional household costs when being required to work from home.
• These costs included increased household utility costs and business telephone calls. The amount that could be claimed would be based on actual expenditure, with evidence, or at a fixed rate of £6 per week without providing receipts.
• Employees are still able to make a claim for the previous four tax years where they are eligible.
• This change does not affect the current rules that allow employers to reimburse eligible homeworking costs without deducting income tax and NICs. 

Workplace benefits

• From 6 April 2026, new income tax and NICs exemptions apply where employers reimburse employees for certain work-related costs.
• Previously, employer-provided eye tests and homeworking equipment were only exempt from tax when provided directly by employers but were taxable when reimbursed. Employers were also unable to reimburse flu vaccination costs directly and instead had to use voucher schemes. This created unnecessary complexity and discouraged practical arrangements, particularly for smaller employers and those with hybrid or home-based workers.
• To address this, the Government announced at the Autumn Budget 2025 that from 6 April 2026 employers can reimburse employees for the cost of:
  • eye tests required for Display Screen Equipment (DSE) users and, where required, glasses for Visual Display Unit (VDU) use;
  • seasonal flu vaccinations; and
  • certain items used in employment duties, including equipment employees need to work effectively from home.
• Where an employee buys a qualifying eye test and, where needed, VDU-specific corrective appliances, a seasonal flu vaccination, or eligible homeworking equipment, and the employer reimburses the cost, no income tax or NICs charge will arise.
• The same tax treatment applies whether the employer arranges and pays the provider directly, issues a voucher, or reimburses the employee. The exemption applies automatically where the conditions in legislation are met. Employers do not need to submit claims, seek approval, or change payroll or reporting processes. 

National Minimum Wage (NMW) rates

• The NMW rates increase on 1 April each year. Employers must use the new NMW rates and NLW rates from the first pay period starting on or after 1 April 2026.
• Many employers unintentionally underpay workers due to errors in calculating pay rates. To learn more about this and to help avoid mistakes, HMRC have a collection of recorded National Minimum Wage videos and webinars brought together to educate employers on how to correctly pay the minimum wage.

Student and postgraduate loans - thresholds and rates

• The new student loan plan and postgraduate loan thresholds and rates effective from 6 April 2026 are as follows:
  • plan 1 - £26,900;
  • plan 2 - £29,385;
  • plan 4 - £33,795;
  • plan 5 - £25,000; and
  • postgraduate loan - £21,000.
• Deduction rates from 6 April 2026 are as follows.
  • Plans 1, 2, 4, and 5 remain at 9% for any earnings above the thresholds for these plans.
  • Postgraduate loan remains at 6% for any earnings above the threshold.
• The student loan and postgraduate loan repayment guidance for employers has been updated with the new thresholds.