National Minimum Wage and National Living Wage

From 1 April 2027, all statutory minimum wage bands and the accommodation offset rise by 3.9%. The new rates apply from each worker’s first pay reference period beginning on or after 1 April 2027. If a pay reference period begins in March and ends in April, the previous rates continue to apply for that period.

Business mileage: two different effective dates

The tax-free approved mileage rate for employees using their own car or van for work is 55p per mile for the first 10,000 business miles. That rate has applied since 6 April 2026 and Budget 2026 makes it permanent; it is not a new April 2027 increase.

From 6 April 2027, the rate for business mileage above 10,000 miles increases from 25p to 35p per mile. Motorcycle, bicycle and passenger-payment rates were not changed by this announcement.

Mandatory payrolling of benefits in kind

Mandatory payrolling of benefits in kind will be introduced in phases. From 6 April 2027, employers must report company cars and car fuel, company vans and van fuel, and employer-provided medical benefits through payroll. Income Tax and the associated Class 1A National Insurance contributions will be dealt with in real time for these items, removing the normal year-end P11D and P11D(b) reporting for benefits that have been payrolled.

• From 6 April 2027: company cars, car fuel, vans, van fuel and employer-provided medical benefits enter mandatory payrolling.
• From 6 April 2028: most remaining benefits in kind are due to follow.
• Exceptions: employer-provided loans and accommodation remain outside mandatory payrolling while HMRC develops its approach; special exceptions can also apply to eligible globally mobile employees.

Dental benefits are not named as a separate Phase 1 category in the published measure. Employers should confirm how any dental arrangement is classified rather than assuming every standalone dental benefit is automatically included.

Income Tax and National Insurance

Headline tax rates on employment income are unchanged. For 2027–28, employee National Insurance remains 8% between the Primary Threshold and Upper Earnings Limit and 2% above it. Employer Class 1 National Insurance remains 15%, with the Secondary Threshold at £96 a week and the Employment Allowance at £10,500 for eligible employers.

The Personal Allowance and the main Income Tax and National Insurance thresholds remain frozen through April 2031, but that freeze was announced at Budget 2025 rather than being a new Budget 2026 measure. The new 24%, 44% and 49% rates apply to savings and property income from April 2027; they are not the rates used for ordinary employment earnings through payroll.

Other payroll-related Budget announcements

• Employment expense claims: from 6 April 2028, removal of the £2,500 Self Assessment threshold will allow more employees to claim relief for unreimbursed employment expenses through PAYE. This is wider access to the PAYE route, not a blanket replacement of Self Assessment in every case.
• Travel and subsistence: from 6 April 2028, Benchmark Scale Rates will be £20 for travel over 5 hours, £60 for over 10 hours and £75 for over 24 hours. Overseas Scale Rates will move from more than 200 destination-specific rates to a simpler tiered structure linked to the new domestic rates.
• Sponsor fees: an employer’s payment of a required Immigration Skills Charge or Certificate of Sponsorship fee will not be treated as a taxable benefit in kind for payments made on or after 28 October 2026.
• PAYE payments: from 6 April 2029, employers will have to maintain a direct debit instruction for unpaid PAYE return liabilities, although they may still pay by another method before a specified cut-off date.
• Company vehicle benefits: from 6 April 2027, the car fuel benefit multiplier will be £30,200, the van fuel benefit charge £825 and the van benefit charge £4,310. Company car appropriate percentages for 2030–31 will be one percentage point above 2029–30 rates, capped at 40%.
• Cancelled shifts: payments for cancelled, moved or curtailed shifts are taxable employment income. Finance Bill 2026–27 will make clear that the same treatment covers payments to agency workers.
• Termination payments: a technical clarification to the tax legislation takes effect from 28 October 2026. Employers handling settlement or termination awards should check the final Finance Bill wording and continue to put taxable elements through PAYE.
• Statutory Neonatal Care Pay: duplicate tax legislation will be repealed, but the payment remains taxable. This is a legislative tidy-up rather than a change to payroll treatment.
• Employee share schemes: from 6 April 2027, the CSOP individual option limit doubles to £120,000 and the scheme will be renamed EMI2; separate EMI option-grant notifications will be replaced by reporting through the year-end return.
• Image rights: the measure treating employment-related image rights payments as employment income, taxed like wages, is delayed until 6 April 2028.
• Parental support: a new Parental Allowance is planned from April 2029 for eligible self-employed fathers, partners and adopters, and some people with recent, broken or irregular employment histories who do not qualify for statutory paternity or adoption pay.
• Pension Tax Allowance: from 6 April 2027 to 5 April 2030, an automatic allowance will protect people over State Pension age with total income at or around the full new State Pension from small Income Tax bills. Employers should continue to operate the PAYE codes HMRC issues.

What employers should do now

• Identify every worker whose pay needs to rise for their first pay reference period beginning on or after 1 April 2027, including salaried staff close to the statutory hourly minimum.
• Review car, van, fuel and medical benefit data and make sure it can be supplied accurately to payroll each pay period.
• Explain to affected employees that tax on Phase 1 benefits will be collected in real time from April 2027 and may change their tax codes or take-home pay.
• Update mileage policies so the existing 55p rate and the April 2027 increase to 35p above 10,000 miles are applied on the correct dates.
• Watch for HMRC’s final operational guidance and software specifications before changing live payroll processes.

Official sources

• Budget 2026 — full document (opens in a new tab)
• Budget 2026 — rates and allowances (opens in a new tab)
• Budget 2026 — overview of tax legislation and rates (opens in a new tab)
• HMRC — mandatory reporting of benefits in kind from April 2027 (opens in a new tab)
• HMRC — approved mileage rates (opens in a new tab)

This update is general information, not legal or tax advice. Rules can change and individual circumstances differ.