Budget 2026 

Post Budget delivery on Wednesday 28 October, what are the implications for Payroll? 

Personal Allowance 

No increase to the Personal Allowance, it will remain frozen until 2031.  The UK Tax rates and thresholds will also remain unchanged. 

National Insurance 

The weekly Lower Earnings Limit will increase by CPI 3.5% rising from £129 to £133. 

All other thresholds remain unchanged and in line with tax, the Upper Earnings Limit will remain frozen until 2031. 

Pension Tax Allowance 

The triple lock will remain in place up to April 2029, but from April 2027 a new tapering adjustment will be introduced for pensioners with income above the full new State Pension (which will rise to £13,036.40), by way of a Pension Tax Allowance (PTA). 

Individuals over State Pension age will be eligible for an automatic tax reduction if their total income, regardless of source, is at or below the value of the full new State Pension. For those with incomes just above this amount, the allowance will be gradually withdrawn through a tapering process. 

Those in receipt of the full new State Pension will pay no tax on income that does not exceed £13,037. Tapering of the PTA will start to apply on income that exceeds this amount and will be withdrawn completely when total income exceeds £13,319. 

To ensure all pensioners on low incomes are protected, the government will include all income (such as small private pensions) in the threshold amount. Provided their combined income does not exceed £13,319, no tax will be payable on these earnings. The value of the PTA will be calculated by applying the basic rate of income tax (20%) to the difference between the full new State Pension and the Personal Allowance. 

The tax allowance will apply from 6 April 2027 until 5 April 2030 and will be uprated in line with the full new State Pension. It will be legislated for in Finance Bill 2026-27, and the government will consider arrangements beyond April 2030 in the usual way so that the State Pension continues to rise each year by the highest of 2.5%, inflation, or the amount required to maintain its value relative to earnings as reached in April 2029 

National Minimum Wage 

National Minimum wage rates will increase by 3.9% from 1 April 2027, the current and new rates are: 

NMW hourly rates	April 2026	April 2027
Workers above compulsory school leaving age but under 18	£8.00	£8.31
Apprentice Rate	£8.00	£8.31
Workers aged 18 to 20	£10.85	£11.27
National Living Wage (21 & over)	£12.71	£13.21
Accommodation Offset (daily rate)	£11.10	£11.53

Benefits in Kind 

Van Benefit	2026/2027	2027/2028
Van benefit scale charge	£4,170	£4,310
Van Fuel benefit	£798	£825

Car Benefit	2026/2027	2027/2028
Car fuel benefit	£29,200	£30,200

Appropriate Percentage Rates for Company Cars 

The benefit in kind Appropriate Percentage Rates will continue with the previously announced projected 1% rises across all vehicle bands, however from 2030/2031, Appropriate Percentages for zero-emission vehicles will increase from 9% to 10%, and rates for cars emitting 1 to 50g CO2/km will increase from 19% to 20%, and all other rates will increase by 1 percentage point, subject to a maximum of 40%. 

Current Percentage rates Company Car Appropriate Percentage Rates 

Government proposals outlining the percentage increases Company car Appropriate Percentage Rate Rises from 2028 

Approved Mileage Allowance Payments (AMAPs) 

Employees that use their cars for business purposes and essential car users received a temporary increase to the rate that could be paid per mile, the changes were announced in May 2026 and backdated to April. 

Employees and others can claim 55p per mile rate for the first 10,000 business miles for cars and vans. This rate for the first 10,000 miles will be set as a permanent amount and the rate for mileage above the 10,000 miles will increase from 25p per mile to 35p which will take effect from April 2027. 

Other announcements 

Electric Vehicle Excise Duty eVED  

The announcement to implement a ‘mileage rate charge per mile’ as announced by the former Chancellor Rachel Reeves in her delivery of the Budget in 2025, will proceed this will introduce a new mileage-based charge for drivers of electric and plug-in hybrid cars, from April 2028.  

The initial charges were announced as 3p per mile for electric vehicles and 1.5p per mile for plug-in hybrid cars. Whilst there has been no mention of any changes to the amounts to be charged further review is underway on certain aspects of the scheme.  

The government announced they will Introduce a mileage estimation tool to support motorists with setting the payment rate per mile and will be made available at the launch date of April 2028. 

Future plans will include development of an automated refunds model by April 2030, to make it easier for motorist to claim refunds in more circumstances, such as when a motorist overestimates their mileage or sells their car. 

Salary Sacrifice Pension cap 

Salary Sacrifice pensions cap will go ahead from April 2029 no further announcement was made on the amount of pension contributions that can be salary sacrificed so the cap so far remains at £2,000. 

Young People NEET 

This Budget confirms funding to provide new opportunities for young people, Not in Employment, Education or Training (NEET). As part of the government initiative, Youth Employment and Skills Package that will provide incentives for employers including: 

• £3,000 Youth Jobs Grant for businesses hiring eligible young unemployed people, an extension of the Jobs Guarantee to those aged 22 to 24,
• £2,000 apprenticeship hiring payment for new young apprentices taken on by non-levy paying employers (typically small and medium-sized enterprises) in England. 

Immigration Skills Charges 

Changes to the tax treatment of the Immigration Skills Charge and 

Certificate of Sponsorship fees will be introduced by government in the Finance Bill 2026-27 so that an employer’s payment of an Immigration Skills Charge or Certificate of Sponsorship fee is not treated as a taxable benefit in kind. 

The change will apply to payments made on or after 28 October 2026. 

Non-Compete Clauses 

The government will introduce legislation so that non-compete clauses in employment contracts do not prevent startups and scaling firms from hiring, or workers in the everyday economy from moving jobs. These reforms will apply across the whole economy.  

The government will consult shortly to understand the wider use of restrictive practices, to ensure that and will set out a detailed position on all of these issues in early 2027, ahead of bringing legislation. 

Increasing the threshold for claiming Tax relief using form P87 

Reforming how taxpayers claim for employment expenses – The government will remove the £2,500 Income Tax Self-Assessment expenses threshold from 6 April 2028. This will allow more taxpayers to claim tax relief on non-reimbursed employment expenses through PAYE and ensure more claims are subject to evidence before relief is issued. The government will keep under review whether there is a case for mandating use of the PAYE route for taxpayers claiming solely employment expenses.