Budget 2026 for Employers - What Changes in Your Policies

The Budget on 28 October 2026 left the headline rates of Income Tax, National Insurance and VAT unchanged, and most of the employer measures are technical. Several of them still change what your policies and payroll procedures should say.

This guide groups the measures by the policy they affect, with the date each one takes effect. The detail comes from the government's Budget 2026 overview of tax legislation and rates and the Low Pay Commission announcement.

The Measures at a Glance

Measure	From	Policy affected
Sponsorship fees and Immigration Skills Charge paid by the employer no longer taxable	28 October 2026	Sponsor licence and recruitment
Minimum wage rises 3.9 per cent, National Living Wage £13.21	1 April 2027	Pay and reward
Business rates relief for pubs rises to 35 per cent, small business relief widened for retail, hospitality and leisure	1 April 2027	Hospitality and retail budgets
Director disqualification for tax security offences	Offences from 1 April 2027	Financial controls
Mileage rate over 10,000 business miles rises from 25p to 35p	6 April 2027	Travel and expenses
Van and fuel benefit charges uprated	6 April 2027	Company vehicles
Cancelled shift payments to agency workers taxed as employment income	6 April 2027	Agency and temporary workers
Share option limit for CSOP schemes doubles to £120,000	6 April 2027	Reward and share schemes
New subsistence day rates and removal of the £2,500 expenses threshold	April 2028	Travel and expenses
Duty to correct tax errors and Customer Correction Notices	1 April 2028	Financial controls
Direct Debit required for PAYE and VAT, and mandatory e-invoicing	April 2029	Finance procedures

Pay and Reward

The National Living Wage rises from £12.71 to £13.21 an hour on 1 April 2027, and the 18 to 20, under 18 and apprentice rates rise by the same 3.9 per cent. Our guide to national minimum wage rates from April 2027 covers every band and the deductions that push pay below the minimum.

National Insurance thresholds stay frozen, with the employer rate at 15 per cent above the secondary threshold. The Lower Earnings Limit rises to £133 a week from April 2027.

For employers with share schemes, the individual option limit for Company Share Option Plans doubles from £60,000 to £120,000 from 6 April 2027, and the interaction with the EMI limit is removed. Scheme rules and reward policies that quote the old limit will need updating.

Travel, Mileage and Expenses

The approved mileage rate for employees' own cars and vans rises from 25p to 35p a mile for business mileage above 10,000 miles in a tax year, from 6 April 2027. The rate for the first 10,000 miles stays at 55p.

From April 2028, new subsistence day rates of £20, £60 and £75 replace the current benchmark scale rates, and employees will no longer need to file a Self Assessment return to claim unreimbursed work expenses over £2,500. Our guide to expenses policy changes for 2027 and 2028 explains what to change and when.

Company Cars and Vans

The van benefit charge, van fuel benefit charge and car fuel benefit multiplier all rise with inflation from 6 April 2027, with the van fuel charge reaching £825. Company car percentages continue to rise each year, and zero emission cars go up a further percentage point in 2030 to 2031.

These changes land in the same month that mandatory payrolling of benefits in kind begins for cars, fuel and vans. A company car policy that sets out employee contributions, private fuel rules and salary sacrifice terms is worth reviewing before both arrive.

Sponsored Workers

When an employer pays a worker's Certificate of Sponsorship fee or the Immigration Skills Charge, the payment is now exempt from Income Tax and Class 1A National Insurance. The exemption applies to payments made on or after 28 October 2026.

Recruitment and relocation policies that recover these costs from workers, or treat them as a benefit, should be checked. Our guide to the HR systems a sponsor licence needs covers the wider duties.

Agency and Temporary Workers

The Employment Rights Act 2025 will require payments to workers whose shifts are cancelled, moved or cut short at short notice. The Budget confirms these payments are taxable as employment income, including payments to agency workers, from 6 April 2027.

Agencies and hirers should agree in writing who pays and how the payment runs through payroll. Our guide to umbrella company rules for recruitment agencies covers the PAYE liability changes that apply to the same supply chains.

Tax Compliance and Financial Controls

Three measures raise the stakes for getting tax right. From 1 April 2027, HMRC can ask for a director to be disqualified for up to five years for qualifying tax security offences.

From 1 April 2028, a general duty to correct tax errors takes effect, and HMRC will be able to issue a Customer Correction Notice where it suspects an inaccuracy. HMRC will also publish more information about deliberate tax defaulters once the Finance Bill becomes law.

Together these make documented financial controls more important. An anti-tax evasion policy, clear error correction procedures and the controls described in our failure to prevent fraud guide give directors evidence that the business takes its obligations seriously.

Payments, Invoicing and Finance Procedures

From April 2029, businesses will have to pay PAYE and VAT return liabilities by Direct Debit, subject to exceptions. VAT invoices will also have to be issued and received electronically in a prescribed format from the same date, with a consultation on the detail running until 20 January 2027.

That is a long lead time, but finance procedures, accounts payable policies and software choices made now will need to support it. Our payment of supplier invoices policies are a sensible place to start.

Business Rates for Hospitality and Retail

In England, relief for pubs, social clubs and live music venues rises from 15 to 35 per cent for 2027 to 2028 and 2028 to 2029. Live music venues with a rateable value of £1 million or more keep the 15 per cent relief.

For retail, hospitality and leisure properties, full small business rate relief will apply up to a rateable value of £18,000, tapering to nothing at £21,000, from 1 April 2027 until 31 March 2029. The government's business rates details set out the full package. Our page on policies for hospitality businesses covers the documents pubs and hotels need.

What Employers Should Do Now

• Update payroll for the April 2027 minimum wage rates and the uprated vehicle benefit charges.
• Add the 35p rate over 10,000 miles to your expenses policy and claims system for April 2027.
• Check that sponsorship fee recovery clauses reflect the new tax treatment.
• Agree with agencies how cancelled shift payments will be paid and taxed.
• Review financial controls and error correction procedures ahead of the April 2028 duty to correct.
• Put Direct Debit and e-invoicing on the finance roadmap for April 2029.

Policy Writers for Budget Changes

Policy Pros updates the documents these measures touch: travel and expenses policies, company car and pay policies, and the financial policies and processes that support tax compliance. We can review your current set against the Budget changes and update it in one go.

To find out which of your policies need changing, contact us for a free quote, or call 020 3951 2875.