Key Changes Effective 6 April 2026
- Removal of income tax relief for employees claiming additional household costs when required to work from home (e.g. utility bills, business calls). The fixed rate claim £6 per week or actual expenses with evidence is no longer available. (gov.uk)
- Expanded exemptions allowing employers to reimburse costs tax-free for:
- eye tests and VDU/Display Screen Equipment glasses where needed;
- seasonal flu vaccinations;
- eligible home-working equipment. These were previously taxed when reimbursed but are now fully exempt under PAYE and National Insurance. (gov.uk)
Other Payroll & Compliance Adjustments
- For Overseas Workday Relief (OWR), employers submitting PAYE notifications for qualifying new residents must estimate the percentage of non-UK earnings and ensure it does not exceed 30%, aligning with what can be claimed through Self-Assessment. (gov.uk)
- Nil returns reinstated under the Construction Industry Scheme (CIS). Contractors must file returns every month—even in months without subcontractor activity—or submit an inactivity request; penalties fully reinstated. (gov.uk)
- EMI scheme limits expanded: from 6 April 2026, companies with gross assets up to £120 million (from £30 million), and employee count fewer than 500 (from 250) can now use the Enterprise Management Incentives scheme with expanded option valuations and longer holding periods. (gov.uk)
Practical Examples & Employer Guidance
| Scenario | Before April 6 | After April 6 |
|---|---|---|
| Employer reimburses an employee for flu shot / eye test | Taxable (unless provided directly) | Fully exempt from Income Tax & NI when reimbursed or provided |
| Employee working from home incurring extra utility costs | Can claim Income Tax relief (£6/week or actual) | No relief permitted anymore |
| Contractor without subcontractor activity | Could skip filing a return if no payments | Must file nil return or file inactivity request, penalties for non-filing |
| Company wants to use EMI scheme | Assets <£30M, <250 employees, limits on options | Now higher thresholds make more companies eligible |
Actionable Steps for Employers
- Review company benefit policies to ensure reimbursements align with new exempt categories.
- Update payroll systems to apply differential treatment after 6 April—mark accounts for exempted items, eliminate homeworking expense claims.
- Train HR/payroll staff on OWR percentage limits and notification forms with new thresholds.
- For contractors, set up routine processes for expiry of inactivity or nil-filing requirements.
- Legal review for companies aiming to use EMI: assess current asset/equity thresholds, franchise structures, and ensure option agreements are re-examined in light of extended holding periods.
These changes significantly alter employer tax compliance in the UK—from benefit reimbursements to contractor filings. Being proactive will reduce risk, streamline operations, and ensure accurate payroll for the 2026-27 tax year.