Employment tax changes from the Autumn Budget

The Autumn Budget includes changes to employee pay, business travel, share schemes and employment expenses.

For employers, the priority is understanding which measures affect costs now and which require changes to payroll, policies or staff reward arrangements in the years ahead.

Verallo’s free Budget guide brings together the key announcements and what they could mean for you.

Download your free guide.

Pay, mileage and business travel

1. Minimum wage rates are rising

From 1st April 2027, the National Living Wage and National Minimum Wage rates will increase:

Age 21 and over: £13.21 an hour, up 50p.
Ages 16 – 17: £8.31 an hour, up 31p.
Apprentice rate: £8.31 an hour, up 31p.
Ages 18 – 20: £11.27 an hour, up 42p.
Accommodation offset: £11.53 a day, up 43p.

Employers should factor these increases into workforce budgets and consider any impact on existing pay structures.

Mileage rates are changing

The approved rate for cars and vans increased from 45p to 55p per mile for the first 10,000 business miles in 2026/27.

The Budget confirms this higher rate will be permanent and increases the rate for additional miles from 25p to 35p from 6th April 2027.

These revised rates also affect the relevant National Insurance treatment. Separate rates remain unchanged for motorcycles (24p per mile), bicycles (20p) and passenger payments (5p per passenger per business mile, where eligible).

Business travel and subsistence allowances

From 6th April 2028, new benchmark rates will apply to qualifying business travel and subsistence expenses. These allow employers to pay set amounts without collecting receipts for every expense, provided the relevant conditions are met.

The new rates are:

• 24 hours or more: £75
• Ten hours or more: £60
• Five hours or more: £20

Overseas subsistence allowances will also move to a tiered system, replacing individual rates for more than 200 destinations. The aim is to simplify administration and better reflect international travel costs.

2. Employment tax and employee incentives

Tax relief on immigration sponsorship costs

Employer payments for Skilled Worker certificates of sponsorship and the Immigration Skills Charge will be exempt from income tax where the fees are paid on or after 28th October 2026.

Businesses sponsoring overseas workers should review how these costs are treated and ensure their payroll processes reflect the change.

Greater flexibility for employee share schemes

From 6th April 2027, reforms to Enterprise Management Incentives (EMI) and the Company Share Option Plan, which is being rebranded as EMI2, will change the options available to employers.

The main changes include:

• Employee ownership trusts: the EMI exception will extend to companies arranging to become controlled by an employee ownership trust.
• Higher option limit: the individual EMI2 limit will increase from £60,000 to £120,000.
• Independent limits: the interaction between individual EMI and EMI2 option limits will be removed, allowing the schemes to operate independently.
• Longer exercise period: the maximum EMI2 period for retaining tax advantages will increase from 10 to 15 years.
• Simpler reporting: companies won’t need to notify HMRC separately when granting EMI options, but grants must still be included on the end-of-year return.
• Extended protection following certain events: the EMI exercise window after disqualifying events will increase from 90 to 180 days.
• Disguised remuneration rules: the period for certain tax-advantaged and non-tax-advantaged shares and options reserved by third parties to qualify for an exception will extend to 15 years.

EMI is designed for eligible smaller, high-growth businesses, while EMI2 provides an alternative for companies that do not qualify for EMI or have outgrown its limits. Employers should assess whether the revised rules create new opportunities to recruit, reward and retain staff.

A new route for employment expense claims

From 6th April 2028, the £2,500 threshold that currently requires employees to file a Self-assessment return to claim employment expense tax relief will be removed.

Employees with claims above this amount will be able to claim through PAYE using form P87 or HMRC’s online expenses service, with supporting evidence. This offers an alternative route for employees who would otherwise need to submit a tax return solely to claim the relief.

What should employers do next?

The measures have different implementation dates, so businesses should consider the changes relevant to their workforce and existing arrangements.

• Review payroll forecasts ahead of the minimum wage increases
• Update mileage policies and systems to reflect the new rates
• Prepare expense procedures for the revised UK and overseas subsistence rules
• Review immigration sponsorship costs and employee share schemes
• Keep track of the forthcoming changes to employment expense claims

How could the Budget affect you?

The impact will depend on your business, employees and existing tax arrangements. If you have questions about what the Budget announcements mean for you, get in touch by calling 0203 912 9933 or email info@verallo.com.

You can also download our free Budget 2026 guide for a concise overview of the announcements.

This article provides a general summary of Budget 2026 announcements and is not tax advice. Information is based on published materials available at the time of writing. Details, eligibility conditions and implementation dates should be checked against current government and HMRC guidance, as further clarification or legislation may affect how the measures apply. Contact Verallo for advice tailored to your circumstances.