This bulletin follows the release of the November Agent Update (Issue 137). In this issue we cover the content most relevant to employment taxes and reward activities.

Autumn Budget

• On 26 November 2025, the Chancellor of the Exchequer announced several updates from an employment tax perspective in the Autumn Budget.
• The most notable updates include the freezing of the personal income tax thresholds and the change to the National Insurance treatment of salary sacrifice pension schemes. Read our analysis on key employment tax measures.

Tax fraud warning for employment agencies and employers

• HMRC has published a Tax Fraud Warning for employment agencies and employers to raise awareness of new fraudulent models which are being marketed to employers and recruitment agencies offering “cheaper” payroll services.
• Organised crime groups are particularly active in the temporary employment agency and recruitment sector. HMRC is aware that businesses are being approached by organisations offering models which falsely claim to be able to reduce employment costs through “tax credits” offset from third party businesses they have acquired.
• These groups falsely claim that they can acquire businesses that have tax credits on file with HMRC, which may include businesses in pre-administration. They claim they can use the tax credits to offset PAYE and National Insurance contributions (NICs) and, as a result, can reduce the amount of employment taxes payable to HMRC.
• Often in these arrangements none of the taxes due to HMRC are being paid. The organisations do this by simply not paying the taxes over to HMRC or creating false documents to give the impression that the appropriate returns are made to HMRC and the taxes paid over.
• To find out more about how these models are marketed, why they should not be used and what employers should do to protect themselves, read HMRC’s Tax Fraud Warning briefing.

Termination of a Share Incentive Plan (SIP) where employees cannot be traced

• Where a SIP is terminated, the trustees must make a reasonable attempt to trace any former employees who hold shares in the SIP.
• The Participation Agreement may set out general directions from a participant which are compatible with paragraph 72(3) Schedule 2 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA) and compliant with paragraph 11.
• Where a former employee participant cannot be traced, and a direction or instruction made by the participant in the Participation Agreement permits, the trustee may donate the shares (or their sale proceeds) to:
  • charity; or
  • the plan company to hold on bare trust for the participant.
• However, where the shares have not been held in the trust for the relevant period to qualify for tax exempt status, and the shares are readily convertible assets, the trustee would have to make sure that the tax and any NICs due are paid through PAYE. The trustees are empowered to dispose of a participant’s SIP shares to comply with the PAYE obligations.
• Where there is an income tax charge and shares are not readily convertible assets, a participant would report this through their self-assessment tax return.
• If the participant cannot be traced, but self-assessment applies, the trustees should seek advice by emailing shareschemes@hmrc.gov.uk.

Employee related securities (ERS) reporting obligations

• Following a query raised at the share schemes forum in July 2025, HMRC has confirmed that no ERS reporting obligations arise under Part 7 of ITEPA where an ERS option is exercised by a personal representative after the employee’s death.
• This also applies to the subsequent acquisition of shares by the personal representatives and their transfer to beneficiaries under the will.
• This conclusion covers the following events being undertaken by virtue of a will or intestacy:
  • the transfer of the option to the personal representatives by operation of law on the employee’s death;
  • the acquisition of shares by the personal representatives on exercising the option; and
  • the transfer of those shares by the personal representatives to the beneficiary or beneficiaries under the will. 

Employer NICs joint elections

• A reminder, from 1 May 2025, if employers use the pre-approved NICs election form template to transfer employer’s NIC liability to employees, they no longer need to submit the form to HMRC for approval.
• Employers who create their own employer NICs election form must still send it to HMRC for approval.
• More information is available about transferring employer’s National Insurance to employees on gov.uk.