Announcements with potential VAT implications for the NHS
The government confirmed its intention to establish up to 250 neighbourhood health centres across England, with 120 expected to be operational by 2030. Funding will be provided through a new on‑balance sheet public‑private partnership (PPP) model, details of which are to follow. Ministers have indicated that lessons from 25 years of PFI contracts will inform the design of this structure.
Discussions are ongoing over how the neighbourhood health centres will operate, but as these arrangements will involve the NHS, Local Authorities, the Voluntary, Community, and Social Enterprise sector, and other third parties working together, an early approach to reviewing the agreed structure could lead to VAT efficiencies in the model due to the varying VAT refund schemes across those involved.
A further £300 million of capital funding has been allocated to NHS technology, with the stated aim of deploying new digital tools to support staff and improve productivity. HMRC has recently updated its interpretation of COS Heading 14 in relation to computer services. It will therefore be important to scrutinise new contracts carefully to confirm whether VAT recovery is available, and to ensure that HMRC’s evidential requirements are met in full.
CRSTAX will be contacting clients shortly with further information about HMRC’s new interpretation of COS Heading 14.
Announcements with potential Employment Tax implications for the NHS
National Living/Minimum Wage rates to increase
The National Living Wage is the minimum amount a worker is entitled to be paid if they are 21 or over. It is currently set at £12.21 an hour and is set to rise by 4.1% to £12.71 an hour from next April.
The National Minimum Wage is the minimum amount for workers aged between school-leaving age (turning 16) and 20. For those aged 18 to 20 the hourly rate is £10 and this will rise by 8.5% to £10.85 an hour. And for those under 18 it’s £7.55 and will rise by 6% to £8 an hour.
If you’re an apprentice and are under 19 or in the first year of your apprenticeship, you receive a rate of at least £7.55 an hour. As above, it will increase by 6% to £8 an hour.
These changes were based on the recommendations of the Low Pay Commission, which is an independent body created to advise the government on changes to the Minimum and Living wage.
In August, the commission projected increasing the Living Wage to £12.71 an hour would ensure it didn’t fall below two-thirds of median earnings.
HMRC/Fair Work Agency – NMW enforcement
The Budget reinforced government commitment to ensuring fair pay and stronger protections for workers, which aligns with the launch of the new Fair Work Agency (FWA) in April 2026. A core priority for the FWA will be enforcing National Minimum Wage compliance, ensuring that all workers receive at least the legally mandated pay. This focus complements the Budget’s measures to raise the minimum wage and improve living standards, giving workers confidence that wage rules will be rigorously applied.
To achieve this, the FWA will establish a dedicated “hidden economy” team to tackle sectors with high rates of wage underpayment and labour exploitation, starting with hand car washes and expanding to other high-risk industries. The agency will follow up on complaints from workers, investigate employers who fail to comply with NMW requirements, and take robust enforcement action, including fines and public naming of offenders.
The FWA will also work closely with trade unions and local business groups to gather intelligence on exploitative practices, enabling proactive enforcement. Additionally, the government will explore using the Companies Directors Disqualification Act 1986 to bar directors whose repeated breaches demonstrate they are unfit to manage companies. By summer 2026, the FWA aims to eliminate the backlog of cases inherited from the previous administration, and all future breaches, including NMW violations, will be publicly reported within a year of case closure.
Together, these measures signal a strengthened enforcement regime designed to ensure that all workers are paid fairly and that employers who break wage laws face swift and visible consequences.
Income Tax & NIC thresholds frozen from April 2028 to April 2031
The Autumn Budget confirmed that Income Tax and National Insurance thresholds will remain frozen until April 2031.
- Personal Allowance stays at £12,570
- Higher-rate threshold remains at £50,270
- The additional rate threshold remains at £125,140 from April 2028 to April 2031
- Employer NIC thresholds also frozen
This extended freeze means more people will move into higher tax bands as wages rise—a phenomenon known as fiscal drag. HM Treasury estimates this will bring hundreds of thousands more taxpayers into higher rates over the coming years, increasing overall tax receipts without changing headline rates.
The Personal Allowance threshold applies UK-wide. The higher rate threshold for non-savings, dividend and property income and for property income will apply to taxpayers in England, Wales and Northern Ireland, and for savings and dividend income it will apply UK-wide. This will be legislated for in Finance Bill 2025-26.
Tax-Free Reimbursements for Health and Homeworking Costs
From 6 April 2026, employers will be able to reimburse employees for certain costs—such as eye tests, flu vaccinations, and home-working equipment—without creating a taxable benefit.
This is something we have discussed at several of our forums and currently, these items are only exempt if provided directly by the employer (e.g., via vouchers or arranged services). This change simplifies administration and supports flexible working and employee wellbeing, while removing the need for complex benefit reporting.
However, the deduction for homeworking expenses where the costs are not borne/reimbursed by an employer will be removed with effect from April 2026.
Mileage-based charge on electric and plug-in cars
A new mileage-based charge called the Electric Vehicle Excise Duty (eVED) will be levied alongside the existing Vehicle Excise Duty on electric and plug-in hybrid cars from April 2028, of 3p per mile for Electric and 1.5p for Hybrids.
The consultation issued today will provide further detail on how eVED will work and seeks views on its implementation. It proposes that drivers will provide an estimate at the start of the year or point of purchase, to be ratified as part of the annual MOT process. Where a car does not require an MOT there is suggestion that they may need to attend a separate check when the car reaches one and then two years old, perhaps as part of a routine maintenance and servicing regime.
It has not been made clear as yet how this will interface with existing approaches to company car taxation. It is possible that, as with the VED charge for other types of cars, it will not give rise to a separate benefit for company car drivers. But as this charge will vary based on travel levels employers will need to consider their approach where costs are increased by employees’ private travel, or how they might plan for a fleet incurring high business mileage.
Benefit in Kind easement for plug-in hybrid electric vehicles (PHEV)
There will be a temporary tax easement to prevent the Benefit in Kind (BIK) value increasing due to new emissions standards. To apply from 1 January 2025 to April 2028. During the easement period, the CO2 emission figure for those PHEVs will be deemed to be a nominal figure of 1g/km for the purposes of the BIK charge rather than the CO2 figure on the registration document.
This will have the effect of reducing the value of the benefit-in-kind charge that applies.
Delay to proposed changes to Employee Car Ownership Schemes
In a welcome development, planned changes to bring Employee Car Ownership Schemes (ECOS) into the scope of company car taxation have been significantly delayed until 2030/31, with transitional arrangements until April 2031.
PAYE changes for the Umbrella Market
No changes have been announced to the forthcoming introduction of joint and several liability for PAYE for users of umbrella companies and other employment businesses. As such, we are now expecting that these rules will be implemented from April 2026 with no significant changes to the previously announced proposals.
For end clients, there are scenarios whereby joint and several liability could arise and we are recommending that all users of labour undertake a review of possible exposure in advance of the rules coming in by carrying out a full due diligence of their labour supply chain.
Mandatory payrolling of benefits – revised guidance issued
HMRC has published a new manual setting out interim guidance and draft legislation for the upcoming mandatory payrolling of benefits in kind (BIK) and expenses. This manual is not final—it will be updated and amended as HMRC clarifies guidance and receives feedback during the consultation process. The aim is to help employers, payroll providers, and software developers prepare for the transition to real-time reporting. HMRC aims to publish final drafts of all legislation by Autumn 2026.
Key Features of the Draft Guidance:
- A section on how to get ready for mandatory payrolling
- How to report a benefit in real time
- What happens when the full amount of tax cannot be collected in the pay period or tax year
- The new FPS data fields to capture benefit details and Class 1A NICs
- Guidance on complex scenarios (mid-year changes, leavers, starters)
- Penalties and interest charges
In the ‘How to report a benefit in kind in real time’ the guidance states –
“It is your responsibility to ensure that employees are paying the correct or as close to the correct amount of tax as possible on the benefits in kind provided.”
This sets the tone for the rest of the manual and there are several references to employers making corrections or updates to payroll submissions. Examples include –
- If benefit information is received after the cut-off for the current payroll run, the employer can update the next FPS
- If there are no more payment dates in the tax year, employers can use the end-of-year process but will have to amend the final FPS and
- where an employee makes good on a benefit provided to them, they will have until 6 July following the end of the tax year to do this, and employers will have until 22 July to adjust the taxable values of the employee’s benefits
The existing guidance on how to fix problems with running payroll when you paid your employee the wrong amount or made incorrect deductions will be updated in Autumn 2026 for mandatory payrolling.
Amending payroll submissions is a labour-intensive task: it cannot be automated, and it has significant knock- on effects on internal finance reports, employees’ records and employer’s PAYE accounts with HMRC and it is to be hoped that HMRC will recognise this and put measures into place to ease this process before the legislation is finally passed.
After a slow start, this project is gathering pace, but there is still time to try payrolling benefits in 2026/27 before it becomes mandatory. Employers have until 5 April 2026 to register with HMRC to try payrolling benefits on a voluntary basis in 2026/27.
Apprenticeships – Simplification and funding to make training for under-25s free for small and medium enterprises
The government is making more than £1.5 billion available over the Spending Review period for investment in employment and skills support. This funds £820 million for the Youth Guarantee, which includes offering a guaranteed six-month paid work placement for every eligible 18 to 21-year-old who has been on Universal Credit and looking for work for 18 months – helping young people across Great Britain take that crucial first step into sustained employment. This also includes £725 million for the Growth and Skills Levy to help support apprenticeships for young people, including a change to fully fund SME apprenticeships for eligible people under 25.
Alongside this funding, the government will introduce new reforms to simplify the apprenticeship system and make it more efficient as short courses are introduced from April 2026, including removing the additional uplift to levy accounts; changing the expiry window to 12 months; changing the government’s co-investment rate to 75% for levy-paying employers once they have exhausted all their funds; and working with employers to streamline the suite of apprenticeship standards available. More details on the wider Youth Guarantee and Growth and Skills Levy package will be announced shortly.
CIS – Tackling Fraud
New HMRC powers will be introduced to tackle fraud and to impose liabilities on businesses operating within the construction sector that enter transactions where they knew or should have known it was connected with the fraudulent evasion of tax.
In addition to powers that will enable HMRC to immediately remove gross payment status, new provisions will include the power to impose penalties of 30% of lost tax on the business, its directors and other persons connected to the business.
Separately, draft legislation will also be included in the Finance Bill to take effect from April 2026, aimed at simplifying and improving CIS administration.
Those operating CIS will need to consider the changes carefully and reinforce existing procedures to appropriately monitor supply chains and relevant transactions.
This will not apply to NHS Foundation Trusts, who are not subject to CIS.
Overseas Workday Relief (OWR) – PAYE Cap Introduced
From 6 April 2026, employers applying OWR through a PAYE notification (under s.690) will be limited to excluding a maximum of 30% of an employee’s earnings from PAYE.
If an individual qualifies for a higher proportion of overseas workdays, the additional relief must be claimed via Self-Assessment. We believe this measure, aims to improve HMRC’s in-year tax collection and simplify compliance while ensuring employees can still access full relief.
Image rights payments
The government will legislate to clarify the tax treatment of image rights to ensure that all image rights payments related to an employment are treated as taxable employment income and subject to income tax, and employer and employee National Insurance contributions. This will be legislated for in Finance Bill 2026-27 and take effect from 6 April 2027.
This follows a tax case in which Bryan Robson successfully avoided an IR35 tax charge on income received relating to his image rights.
NIC relief on Salary Sacrifice Pension Contributions
Popular in the Private Sector, due to the flexibility of their Pension Schemes, operated under Salary Sacrifice arrangements will take a hit, albeit not quite yet.
From 1 April 2029, only the first £2,000 of Salary Sacrifice pension contributions will be exempt from NICs. Anything above will be subject to employer and employee NICs like other employee workplace pension contributions. However, the schemes will potentially still be worthwhile for higher earners who are seeking to avoid the impact of the tapers applying to child benefit and tax-free childcare.
Contributions through Salary Sacrifice, like all pension contributions, will still be exempt from Income Tax (subject to the usual limits).
Employers will need to report the total amount sacrificed through their existing payroll software. There are still many unanswered questions about how this will be enforced per pay preference period or annually for example and how will they define exactly what is caught. We understand HMRC will engage with stakeholders on this and publish further guidance accordingly.
General announcements
Mandatory tax adviser registration with HMRC
The Government has confirmed a major overhaul of how professional tax agents are identified and supervised. In short, anyone who deals directly with HMRC on behalf of clients — from traditional tax advisers to payroll providers operating PAYE systems for employers — will soon have to appear on a single HMRC-run register. The aim is to give taxpayers confidence that anyone representing them meets consistent, legally enforceable standards.
Those affected include all professionals who submit returns, claims, payroll information or other communications to HMRC for clients. Under the new rules, these advisers will be legally required to register with HMRC and demonstrate they meet minimum competency, conduct, and eligibility criteria. This brings payroll bureaux and outsourced payroll processors into scope where they interact with HMRC systems on employers’ behalf.
The Budget announced that mandatory registration will begin in May 2026, supported by a government investment of £36 million to update and modernise HMRC’s registration infrastructure. A transition period of at least three months will follow, and HMRC will publish more detailed timelines and guidance for different types of advisers ahead of implementation. The policy’s objective is to raise standards across the tax advice and payroll services market by giving HMRC clearer oversight of who is acting for taxpayers. It will help HMRC identify and intervene where advisers fail to meet required standards or are not legally allowed to operate, addressing long-standing gaps in the current fragmented system. The new rules will be legislated for in the Finance Bill 2025–26.