HMRC Payroll Updates: Key Changes Employers Should Take Stock of Before the Christmas Break

As businesses wind down for Christmas and look ahead to the new year, HMRC has released a number of payroll updates that employers should have firmly on their radar before 2025/26 begins.  The guidance covers a new student loan plan, electric vehicle mileage rates, National Insurance for internationally mobile employees, pensions duties, and upcoming cryptoasset reporting requirements.

Together, the updates provide a useful checklist for employers looking to start the new year on solid ground.

New Student Loan Plan 5 on the Horizon

One of the most significant changes is the introduction of Student Loan Plan 5, which will operate in the same way as existing Plan 1, 2 and 4 loans. For PAYE purposes, repayments will begin on 6 April 2026, with an annual earnings threshold of £25,000 and a repayment rate of 9 percent on income above that level.

Plan 5 will apply to individuals who applied to Student Finance England and started their courses after April 2023. While deductions are still over a year away, employers are being encouraged to use the coming months to ensure payroll systems and processes will be ready.

New Advisory Electric Rates for Company Cars

HMRC has also updated its Advisory Fuel Rates guidance to include new Advisory Electric Rates (AER) for fully electric company cars charged at public charging points.

These approved mileage rates can be used to reimburse employees for business travel in electric company cars and to calculate repayments for private use of electricity. If the reimbursement rate is equal to or below the AER, there is no taxable benefit and no Class 1A National Insurance to pay.

Where the cost per mile at a public charger exceeds the AER, employers or employees may use a higher rate, provided they can demonstrate that the actual cost was higher. Any excess that cannot be justified may be treated as taxable income.

HMRC has also confirmed that no taxable benefit arises where electricity is provided to charge company cars at the workplace, where a home charging point is installed, or where a charge card is provided for public charging.

Clarified NIC Guidance for Internationally Mobile Employees

New guidance has been published to help employers determine when National Insurance Contributions (NICs) are due for internationally or globally mobile employees.

HMRC has confirmed that NIC liability is generally determined by when the work is carried out, not when the earnings are paid. This is particularly relevant for payments such as bonuses, which may be paid after an employee has moved abroad or changed roles.

If an employee was liable for NIC at the time the work was done, NIC will still be due even if the payment is made later when the employee is overseas. Employers must first establish whether NIC liability existed and, if so, calculate and deduct NIC accordingly.

Additional guidance includes worked examples covering NIC calculations for employees working abroad, employees coming to the UK, and PAYE deductions in cross-border scenarios.

Correcting NIC Errors Through RTI

Where NIC has been overpaid or underpaid for internationally mobile employees, employers are required to correct the position through Real Time Information (RTI), going back up to six years. Supporting evidence must be retained, and amendments must reference “NIC refund for Internationally Mobile Employees” where applicable.

Employees seeking refunds must contact their employer first. The employer is responsible for making the RTI amendment and repaying the overpaid NIC. Where an RTI amendment cannot be made, detailed information must be provided to HMRC for all affected pay periods.

Automatic Enrolment Reminders for New Employers

The Pensions Regulator has refreshed its tailored online guidance for employers, particularly those taking on staff for the first time. Automatic enrolment duties begin from the day the first employee starts work, and employers are reminded that compliance is a legal obligation, not something that can be deferred.

Supporting Retirement Planning Through the HMRC App

HMRC is also encouraging employers to support staff with retirement planning by signposting the HMRC App, which gives employees 24/7 access to pension information. New guidance and a pension checker tool aim to help employees better understand and manage their retirement savings.

New Cryptoasset Reporting Framework Ahead

Finally, HMRC has outlined a new Cryptoasset Reporting Framework that will affect businesses exchanging cryptoassets or providing platforms for customers to trade them. From 1 January 2026, such businesses will be classed as Reporting Cryptoasset Service Providers and will be required to collect customer data and relevant tax information.

Registration with HMRC’s online service must be completed by 31 January 2027, with the first report due by 31 May 2027. Penalties of up to £300 per user may apply for late, inaccurate or missing reports. HMRC has also issued guidance for UK users on the information they must provide, enabling cryptoasset activity to be linked to tax records.

A Seasonal Reminder to Plan Ahead

With Christmas often marking a natural pause for review, HMRC’s updates serve as a timely reminder for employers to check payroll processes, update systems, and plan for what lies ahead. Taking stock now can help ensure a smoother transition into the new year, without unexpected compliance issues once business resumes in January.

Source: Nextdigm