Employment tax update - October 2026

This bulletin follows the release of the August and September Agent Updates (Issue 146 and Issue 147). In this issue we cover the content most relevant to employment taxes and reward activities. 

Phased roll-out for mandatory payrolling of benefits in kind (BIKs)

• Employer clients and their agents should start having conversations to get ready for mandatory payrolling of BIKs. 
• From 6 April 2027, mandatory payrolling will apply only to company cars, car fuel, vans, van fuel and medical benefits (Phase 1). 
• In preparation for Phase 1 of mandatory payrolling, employers should:
  • make a list of all BIKs they offer to employees and would normally report to HMRC on a P11D form;
  • ensure their payroll software can handle real-time reporting for BIKs for Phase 1 and complies with HMRC’s requirements (this will need to be in place by April 2027); 
  • work out how they will manage employees who leave or join during the tax year, or benefits that change in value; and
  • understand the process for dealing with any underpayment or overpayment of tax so they can support employees. 
• It is worth noting that where employees are also paying back any underpayments of tax on benefits provided in tax years prior to 6 April 2027, it may feel to them that from April 2027 they are “paying tax twice” on the BIKs. It is important that employers explain to their employees that this is not the case by making sure that they:
  • talk to their employees now, ahead of the mandatory payrolling changes taking effect;
  • avoid terminology such as “double taxation” as it could imply that employees are paying additional tax, which is incorrect;
  • prepare for instances where employees are paying for the current tax year as well as underpayments for previous tax years; and
  • advise employees to contact HMRC if they are experiencing any financial hardship due to the overlapping taxation. 
  • Read information on support for employers to communicate these changes. 

Payrolling BIKs – exceptions and Class 1A National Insurance contributions (NICs)

Globally mobile employees

• Globally mobile employees (GMEs) will be exempt from mandatory payrolling of BIKs. This recognises that globally mobile working arrangements create genuine practical difficulties in calculating or reporting BIKs through payroll in real-time. Employers can continue reporting these benefits using forms P11D and P11D(b) at year-end or choose to payroll them voluntarily. 
• Employers with eligible GMEs need to submit an online G-Form, that will be made available in November 2026, telling HMRC which employees should be excluded from payrolling. 
• Employers should start preparing arrangements for GMEs in advance of mandatory payrolling by:
  • identifying employees who may be eligible for the GME exception;
  • reviewing BIKs they provide to their employees;
  • considering any necessary changes to payroll, HR and finance processes; and
  • speaking to payroll providers and considering how to communicate this information to their employees. 

Class 1A NICs and voluntary payrolling 

• Employers can register to voluntarily payroll these non-mandated benefits for the 2027/28 tax year from November 2026. 
• From 6 April 2027, employers who voluntarily choose to payroll BIKs that are not part of Phase 1 must also pay Class 1A NICs through payroll. They will no longer be able to report Class 1A NICs at the end of the tax year through form P11D(b).
• Further information about voluntary registration will be included in updated mandatory payrolling of Benefits in Kind guidance in autumn 2026.

Reporting for directorships and close companies

• The Income Tax (Additional Information to be included in Returns) Regulations 2025 introduced new reporting requirements for self-assessment taxpayers relating to directorships and close companies. 
• Following feedback, HMRC has published updated guidance for completing self-assessment tax returns across filing channels to help understand how the new requirements should operate in practice. 
• The updates include:
  • making clearer that if individuals are already required to submit self-assessment tax returns and were directors of UK companies during the relevant tax year, including dormant companies, additional information must be provided through the SA102 employment pages;
  • confirming that if individuals are directors required to submit self-assessment tax returns, they must generally report each directorship through an SA102 “Employment” page, including where no remuneration or shareholding exists for that tax year;
  • explaining what to do if individuals are directors of non-UK companies, charities or community interest companies, taking into account whether payments or benefits have been received in respect of the directorship; and
  • providing guidance for agents and their clients using the online reporting system on how to report directorship details where the number of employments and directorships might exceed available employment pages. 
• Individuals should make sure that they check the latest guidance on how to complete a self-assessment tax return for the tax year.
• HMRC has also confirmed that it will take a considered approach to compliance on a case-by-case basis. HMRC will take into account all relevant facts and circumstances, including the reasonable efforts individuals have made to meet their obligations in light of the information and guidance available at the relevant time. 

Guidelines for short-term business visitors (STBVs)

• HMRC has recently published new Guidelines for Compliance for help with short-term business visitors. 
• STBVs are individuals who normally work overseas but come to the UK for short periods to carry out employment duties. 
• The new guidelines are primarily for UK employers with overseas employees working in the UK on a short-term basis. However, they will also be useful to overseas employees and professional advisers.
• The guidelines provide practical support by:
  • explaining the income tax, NICs and PAYE treatment for STBVs;
  • highlighting common errors and areas of risk identified by HMRC; 
  • advising what records and evidence should be retained; and
  • explaining what to do if a mistake is made. 

Employment-related securities (ERS) – penalties for missed return deadline

• The deadline for submitting the ERS return for 2025/26 was 6 July 2026. Employers who did not submit a return (including a nil return) may have already received a £100 late filing penalty. 
• Additional automatic penalties of £300 apply if a return remains outstanding three months after the filing deadline, with a further £300 penalty if it is still outstanding after six months. 

ERS returns – accessibility improvements

• HMRC is updating ERS return templates, guidance and technical notes to improve accessibility and make them easier to use. 
• New versions will be published in November 2026 and will apply from April 2027.