May 2026 Newsletter
Countdown to taxation of benefits-in-kind via the payroll is underway
There is less than a year to go before all employers must tax benefits-in-kind via the payroll, the Chartered Institute of Taxation has warned.
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Benefits-in-kind are non-cash benefits provided by employers to employees or directors. Common benefits include company cars, private medical insurance and gym membership.
While the benefit is paid for by the employer the recipient is required to pay Income Tax and potentially National Insurance contributions (NICs) on the value of the benefit, as if this value had been added to their salary.
Additionally, the employer must pay employer NICs on the value of the benefit. According to HMRC more than 3.5 million employees receive a taxable benefit-in-kind.
Currently, most employers compute the value of a taxable benefit after the end of the tax year and report it on a P11D form to HMRC and the employee. This means the employer potentially has up to 15 months to calculate, verify and report the value of a benefit.
From 6 April 2027 it will be a legal requirement to report and pay Income Tax and NICs on most benefits-in-kind and taxable expenses payments via payroll rather than waiting until the end of the tax year.
Sarah Hewson, Vice-Chair of the CIOT's Employment Taxes Committee, said:
'Mandatory payrolling of benefits will have a big impact on employers, employees and software providers. Don't leave it too late to get ready for this change.'
Source: CIOT Website
UK government to review mileage rates
The government has confirmed it will review approved mileage rates for business users ahead of a future Budget.
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The announcement comes after more than a decade without change - despite rising fuel, insurance and maintenance costs leaving many workers covering the gap themselves.
Rachel Reeves, the Chancellor of the Exchequer, highlighted the issue earlier this month, recognising that approved mileage allowance payment rates have not changed since 2011 even as motoring costs have evolved significantly.
The government says the workers-first review will focus on people who rely on their car to do their job, ensuring 'they are not left out of pocket'. As part of this, the government says it will meet with people struggling with increased costs to inform this review as it develops.
In the meantime, the government says wider action is being taken to support people with the cost of living and keep prices down at the pump, including by freezing fuel duty until September.
Dan Tomlinson, Exchequer Secretary to the Treasury, said:
'Millions of working people rely on their car to do their job. But mileage rates have been unchanged since 2011 and that's increased the cost of working. A review is well overdue.
Keeping prices down at the pump is an important way we can help people with the cost of living which is why fuel duty is already frozen.'
Source: GOV.UK Website
UK businesses should apply now for Vaping Products Duty
Vaping-related businesses and supply chains need to register now for Vaping Products Duty (VPD) and the Vaping Duty Stamps (VDS) Scheme, says HMRC.
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Businesses need to provide the required information now to register for HMRC approval and begin the process of applying for duty stamps.
From 1 October 2026, this information will be used to determine when duty becomes payable, making registering now an essential step in early preparation.
Businesses can visit GOV.UK and search for 'vaping duty' to access guidance. It explains which vaping products are liable to the new excise duty, the key dates and milestones ahead, and the roles and responsibilities of manufacturers, importers, warehousekeepers and other businesses across the supply chain.
It also sets out how and when businesses need to register and apply for the relevant approvals, which will take at least 45 working days if further information is needed.
Rachel Nixon, HMRC's Director of Indirect Tax, said:
'From 1 April 2026, UK vape manufacturers, importers and warehousekeepers can apply to HMRC for VPD and VDS Scheme approval, which is essential for these businesses to continue trading legally from 1 October.
Our guidance brings all the key information together, and using it now will help firms prepare properly, avoid errors and ensure they can continue trading when the new requirements apply from October.'
Source: HMRC Press Release
Government unveils crackdown on late payments
Small businesses to be backed by new, stronger measures to tackle late payments, the government has announced.
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The Small Business Commissioner will be given sweeping new powers to investigate poor payment practices, adjudicate payment disputes, and fine the worst offenders – with fines worth tens of millions for firms that persistently pay late or fail to comply with the new laws.
The government says the measures will tackle a problem costing the UK economy £11 billion every year.
The changes will include a new 60-day cap on payment terms on all large firms when paying smaller suppliers. New mandatory interest on late payments will also be introduced, with a requirement for all commercial contracts to include statutory interest set at 8% above the Bank of England base rate.
Business Secretary Peter Kyle said:
'Far too many businesses are forced to shut down because they have not been paid – that is simply unacceptable.
We are unveiling the strongest, most robust changes to payment laws in over a generation – laws that will transform the fortunes of small businesses for years to come and make their day to day lives much easier.'
Source: GOV.UK Website
New procurement rules offer SMEs hope
The government's new procurement rules that target opportunities for smaller businesses offer hope to SMEs, according to the British Chambers of Commerce (BCC).
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Government departments have, for the first time, set individual spending targets for SMEs to deliver over £7.4 billion a year to small businesses by 2028.
Departments have for the first time, individually set direct SME spending targets and will publish yearly progress updates ensuring they are held to account, those who fall behind will need to set out robust actions on how they will improve.
In 2024, the BCC and Tussell's SME Procurement Tracker found only 20% of direct procurement spend from the wider public sector, including central government, went to SMEs.
Jonny Haseldine, Head of Business Environment policy at the BCC, said:
'This shake up is long overdue as public procurement spend with SMEs has been stuck in a rut. Although the value of contracts with SMEs has continued to rise their slice of the pie is still far too small. For too many businesses, government contracts remain out of reach.
This new scheme has the potential to be a game changer, giving smaller firms across the UK greater access to procurement opportunities and supply chains.
As has been demonstrated by Chamber-led supply chains at major infrastructure projects such as Sizewell C and Hinkley Point, SMEs are a vital part of the ecosystem. They provide local skills and knowledge to projects as well as significantly boosting regional economic growth.'
Source: BBC Website, GOV.UK Website
Pensioners urged to be alert to Winter Fuel Payment scams
HMRC is warning pensioners to be on high alert for scams as the recovery of Winter Fuel Payments begins this month.
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Almost two million people are expected to repay their winter 2025 payment due to their annual income being more than £35,000.
HMRC saw more than 25,000 Winter Fuel Payment scam referrals over the last 12 months. It is warning that scammers may now use the recovery process to target this group.
For most, the payment will be recovered through a change to their PAYE tax code from April 2026 with no need to contact HMRC.
For those in self assessment who file online, the payment should be pre-populated in their 2025/26 tax return. Customers should check and add it manually if it is not shown. Paper filers will need to add it on their tax return.
This applies across the UK - including in Scotland, where the payment is known as the Pension Age Winter Heating Payment and in Northern Ireland, where payments were made by the Department for Work and Pensions on behalf of the Northern Ireland Executive. In all cases, recovery is handled by HMRC.
Myrtle Lloyd, HMRC's Chief Customer Officer, said:
*'Criminals are great pretenders and often use fake letters, emails, calls and texts to impersonate HMRC and trick people into giving them money.(
I'd encourage anyone who's unsure to use our online tool at GOV.UK to check whether and how their payment will be recovered - there's no need to call us.'
Source: HMRC Press Release
Higher energy prices could leave typical British households £480 worse off this year
Higher energy prices due to the conflict in the Middle East are set to make the median working-age British household £480 worse off this year, according to the Resolution Foundation.
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The think tank based its estimates on market-forecasts for the rise in energy prices consistent with market pricing after the announcement of a ceasefire.
For families with above average income, rising energy prices will likely tip living standards growth into negative territory, says the Foundation.
The typical household, previously on track for 0.9% growth, is now set to see its income fall by 0.6% – a difference of £480 – over the course of the current financial year.
It says that average income growth for the poorest fifth this year is now set to be just 1.2%, down from 2.8% before the conflict.
James Smith, Chief Economist at the Resolution Foundation, said:
'Despite hopes for a sustained peace, the path of this conflict remains uncertain and energy prices remain well above pre-war levels, meaning many households face a decline in their purchasing power this year.
This squeeze will run right through the income distribution. Lower-income households will still see some income growth thanks to a long-awaited rise in real benefit levels, but inflation will likely knock more than a percentage point off what they stood to gain.
For those in the middle and towards the top of the income distribution, even the thin growth they had been expecting has tipped into negative territory.'
Latest guidance for employers
HMRC has published the latest issue of the Employer Bulletin.
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The April issue has information on various topics, including:
- Reminder of key dates and processes for reporting benefits in kind (BiKs).
- Real Time Information submission problems - Incorrect handling of Payroll ID.
- Removal of the tax relief for non-reimbursed homeworking expenses.
- The official rate of interest from 6 April 2026.
- The 'Tell ABAB' survey 2026.
- Statutory Sick Pay changes - what employers need to know.
Source: GOV.UK
