At the end of June, HMRC published a policy paper called Tax Update 2026 focusing on the themes of simplification, modernisation and fairness.
The paper brought together a range of new consultations, reviews and proposals for areas of reform with the stated goals of reducing administrative burdens, improve certainty, fairness, and taxpayer experience. This is the second year we have had a similar “day” of policy announcements, many of which will be relevant to employers.
Payment of Tax
The proposals include two consultations suggesting changes to the timing and method of tax payments.
The most obviously relevant to employers, is the consultation on requiring both PAYE and VAT payments to be made by Direct Debit. HMRC would like to hear views on plans to make Direct Debit the default payment method for VAT and PAYE liabilities, subject to certain exceptions. Under HMRC’s plans, a penalty may be charged in future where payment is not made by Direct Debit.
This consultation closes on 16 August 2026. The ATT will be responding and would welcome feedback for consideration as part of our response. Please email [email protected] with your comments before 17 July 2026.
The second consultation, on More Timely Payments for Income Tax Self-Assessment (ITSA) at first looks to be relevant only to employers who are themselves within self-assessment. However, the consultation includes proposals for individuals who have both employment income and self-assessment liabilities, to pay more of their tax liability as a deduction via their PAYE coding notice.
This could have an impact on employers, who may be required to process more PAYE coding amendments and deduct more tax as a result. For small employers who currently qualify to make payments quarterly, the increased tax collections could mean that they find themselves needing to make monthly instead of quarterly payments. This could have a bearing on the cash flow of an employer.
The ATT will also be responding to this consultation – please send any comments to [email protected].
Employment expenses
The announcements also include a proposal to review how employees make claims for tax relief on employment expenses. Currently, where employees incur qualifying work-related expenses which are not reimbursed by their employer, the employee must submit a Self-Assessment return to claim tax relief once their allowable expenses exceed £2,500. For expenses below that level, employees can use a dedicated portal to claim relief. As yet, we don’t have a timescale for the review, but employers may want to be aware of any changes so they can support affected staff.
Continuing the theme of employment expenses, the Government has also said it will review Benchmark Scale Rates (BSR) and Overseas Scale Rates (OSR). These flat rate payments that employers can use to employees for the cost of meals and other travel expenses when they travel for work in the UK or overseas. The BSR apply in the UK and the OSR apply for travel outside of the UK. These are both intended as administrative simplifications, and the Government will look to see both if the figures need to be uprated, and if future simplification is possible by increasing alignment between OSR and BSR. The announcements follow pressure from industry, so many employers (and their employees) will likely welcome changes here - providing they are increases. Again, we don’t have any further details or a timescale for the review yet.
PAYE Settlement Agreements (PSAs)
The Government has also published a call for evidence on PSAs, seeking to improve HMRC’s understanding of how they operate in practice, including how employers interpret the rules and where there may be complexity or uncertainty. At this stage there are no proposals to change how benefits or expenses are taxed.
This consultation closes on 15 September 2026, and employers can either respond directly, or share their experiences of using PSAs with our technical team. Please send any feedback by 27 July 2026.
National Insurance contributions (NIC)
Finally, the Government has announced one consultation, one call for evidence and one formalisation of an existing practice in the area of NIC.
The consultation itself has not been published but is expected to cover some of the complexities around NIC debt collection. This is likely to be quite technical, and employers may have more to say on the call for evidence, which is looking at the design, operation and future direction of voluntary NIC contributions. Significant changes to overseas voluntary NICs took effect earlier this year, and this is looking more widely at those who opt to contribute voluntary.
This consultation closes on 15 September 2026, and employers can either respond directly, or contribute to the ATT response by emailing [email protected]. Please send any feedback by 27 July 2026.
A list of consultations which the ATT is intending to respond to is available on our Current Consultations page.
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