Autumn Budget 2026: Employment tax changes for employers
Whilst the Chancellor only briefly mentioned employment taxes during his speech, the Budget releases included several other announcements relevant to employers.
Increase to approved mileage allowance payments
For employees using their own vehicles for business journeys, the Government announced an increase to the approved mileage allowance payment (AMAP) rates.
From 6 April 2026, the AMAP rate increased to 55p per mile for the first 10,000 business miles, while the rate for business mileage above 10,000 miles remained at 25p. It has now been announced that the 55p rate will be made permanent and that the higher mileage rate will increase from 25p to 35p from 6 April 2027.
Although employers are not required to pay the full approved rates, payments up to the AMAP limit can be made free of tax and NIC. Where lower rates are paid, employees may be entitled to claim tax relief on the shortfall.
Company car benefit-in-kind (BIK) rates
The Budget also confirmed the continued annual increase in company car benefit-in-kind (BIK) rates.
Rates up until 2029/30 had already been announced previously, but it was confirmed that a further 1% increase across all vehicle bandings would apply from 2030-31. This will take the BIK rate for fully electrical vehicles up to 10% by April 2030 (currently 4%), with the maximum BIK rate increasing to 40% for vehicles with CO2 emissions of 160g/km or more.
This measure is expected to bring additional revenues of £310 million for the government in 2030-31 and a further £345 million by 2031-32.
Mandatory payrolling of benefits
It was also confirmed that mandatory payrolling of benefits is set to go ahead for certain benefits from April 2027, with most other benefits mandated in from April 2028.
Under the new regime, company cars, company vans, fuel and medical benefits will need to be reported and taxed in real time through payroll. All other benefits except beneficial loans and employer provided accommodation will come within scope from April 2028.
This will largely remove the need for annual P11D reporting. However, during the transition period, some employers may need to operate both systems, with certain benefits reported through payroll and others still reported on form P11D. Employers may wish to consider voluntary payrolling ahead of the mandatory implementation dates to simplify compliance, although this may not be practical for all benefits.
Tax treatment of the immigration skills charge and certificate of sponsorship fees
The Government has confirmed that employer payments of the immigration skills charge or for certificate of sponsorship fees made on or after Budget day (28 October 2026), will not be treated as a taxable benefit in kind.
