UK Payroll Updates For Employers

The UK tax authority, HMRC, has released initial high-level guidance for employers on a new student loan plan, for cryptoasset service providers, and NIC related matters. Below are the key updates for the UK employers and payroll professionals to be aware of, as they affect business operations and payroll administration in the upcoming months.

Introduction of new student loan plan type - Plan 5

• New student loan plan 5 will be operated and collected in the same way as the current loan plans type 1, 2 and 4.
• For PAYE (Pay As You Earn) purposes, repayments will begin on 6 April 2026, with annual threshold of £25,000. Repayments will be made at a rate of 9% of earnings above this threshold.
• Plan 5 applies to individuals who used to Student Finance England and started courses after April 2023.

New Advisory Electric Rate for fully electric company cars

Advisory Fuel Rates (AFR) guidance now includes new Advisory Electric Rates (AER) for fully electric company cars charged at public charging points.

• If the cost per mile of a public charger exceeds the AER, employers or employees may use a higher rate, provided they can show the cost per mile was higher.
• AER are HMRC approved mileage rates used to -
  • Reimburse employees for business travel in fully electric company cars.
  • Calculate repayments by employees for private use of electricity in company cars.
• If the reimbursement rate is equal to or less than the AER, there's no taxable profit or Class 1A National Insurance to pay. If the rate is higher, and the employer cannot justify the excess cost, the difference may be treated as taxable income.
• No taxable benefit arises when electricity is provided for charging company cars at work or if an employer installs a home charging point or provides a charge card for public stations.

Guidance on when National Insurance Contributions (NIC) should be paid on earnings for internationally or globally mobile employees

• HMRC has added guidance to help employers determine when NIC is due on earnings paid to internationally mobile employees.
• Generally, earnings are paid at the time when the work is done, but some payments are done later, like bonus. For instance, an international mobile employee may leave the job in one country and return home or take another employment in another country.
• In the updated guidance, HMRC confirms that if the employee was liable for NIC at the time when work was carried out, they will continue to be liable for NIC in respect of earnings, even if they are paid later.
• The employer should first determine whether the employee was liable for NIC or not. If the employee was liable for NIC, then the employer should calculate the NIC and deduct it from the earnings even if it is paid later when the employee has gone abroad.
• Additional guidance has been published by HMRC, including examples of NIC calculations for internationally mobile employees, how to calculate NIC for employees working abroad, and how to calculate and make PAYE deductions for employees coming to work in the UK from abroad.

NIC corrections for internationally mobile employees

• In cases where NIC for internationally mobile employees has been over or underpaid, employers should correct the overpayment or underpayment through Real Time Information (RTI) going back 6 years, providing relevant evidence to support the amendment.
• In addition to the evidence required on how to correct employer returns where NIC has been over or underpaid, the employer must use the reference 'NIC refund for Internationally Mobile Employees' and provide the reason if the amendment cannot be made through RTI.
• Employees who wish to claim a refund where NICs have been overpaid, they must contact their employer first. The employer is required to make an RTI amendment and repay the overpaid NIC to the employee. If an RTI amendment is not applied for or submitted, then the employer must provide information to HMRC for all affected pay periods affected.

Automatic enrollment duties for employing staff for the first-time employers

• The Pension Regulator has refreshed its tailored employer duties online, which explains what needs to be done and when.
• Automatic enrolment is an employer's legal duty which begins on the day when the first staff member starts work.

Employer can help employees prepare for a retirement plan

• The employer can support their employees with retirement planning and finances through the HMRC App. This App is free to download and provides employees with 24/7 access to pension information.
• HMRC has also launched guidance and a checker tool in the App to put pension planning power in employees' hands.

New cryptoasset reporting framework for employers

• If employer's business is to exchange cryptoassets on behalf of customers or provide a means for customers to trade cryptoassets. In that case, he employer will be classified as a Reporting Cryptoasset Service Provider.
• From 1 January 2026, HMRC introduced the Cryptoasset Reporting framework under which employers must collect customers' data and relevant tax information and report it to HMRC.
• The employer must register with HMRC's online service by 31 January 2027 and submit the first report to HMRC by 31 May 2027. Penalties of up to £300 per user apply for non-compliance, late reporting, and inaccurate data
• For the users of a UK cryptoasset service, HMRC has also published guidance on the information that must be provided to UK cryptoasset service providers. This will also enable linking of cryptoasset activity to the user's tax records.

Our Comments

With multiple key payroll changes coming into effect, employers must review their current payroll processes to ensure compliance and precise payroll planning for the remainder of the 2025-26 tax year.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.