Employees
Company cars and vans (Table D)
The basis for taxing company cars and fuel provided for private use is set out in the Table. Annual increases in the rates for use of the car had already been set up to 2029/30 ‘to provide long-term certainty for taxpayers and industry’. The rates are intended to provide a strong incentive to use electric vehicles, while rates for hybrids will be increased to align more closely with the rates for internal combustion engine vehicles. Some of these will see a significant increase in 2028/29.
This Budget included an announcement of the company car rates for 2030/31 as well, adding a further percentage point to all the rates for cars with an emissions rating (which will range from 20% to 40%). The rate for zero emissions cars will rise from 4% in 2026/27 to 10% in 2030/31.
The figures used to calculate the following benefits all increase for 2027/28 in line with inflation:
- the benefit of free use of business fuel for private journeys (£30,200);
- the taxable amount for the availability of a van for more than incidental private use (£4,310);
- the taxable amount for an employee’s private use of fuel in a company van (£825).
Mileage allowances
The rates of mileage allowance which can be paid to employees using their own car for business journeys without incurring a tax charge were fixed for many years at 45p for the first 10,000 miles in a year, and 25p above that. The 45p figure was raised to 55p with effect from 6 April 2026, and the 25p figure will be raised to 35p from 6 April 2027.
Payrolling benefits
For several years, it has been possible for employers voluntarily to ‘payroll’ benefits provided to directors and employees. This means that the benefit is processed through the payroll for each pay period, rather than being dealt with via a P11D form at the end of the tax year (with potential PAYE coding adjustments for the worker).
It had been intended that nearly all benefits would be subjected to mandatory payrolling from 6 April 2027, but last June it was announced that this would be restricted to only certain benefits: company cars, vans, fuel and medical benefits. Mandatory payrolling is due to apply to all other benefits from 6 April 2028 (except for beneficial loan and accommodation benefits).
From 2027/28, the employer Class 1A NICs on any payrolled benefits will have to be paid each pay period, rather than annually in arrears.
It is important that all businesses affected by these changes are well prepared and that employees are made aware of the impact there will be on their payslips and net pay.
Employee share schemes
The government will introduce legislation to make changes to the Company Share Option Plan (CSOP) and Enterprise Management Incentives (EMI) schemes.
- The CSOP individual option limit will be doubled to £120,000.
- The interaction between the CSOP and EMI individual options limits will be removed.
- The CSOP exercise period will be extended to 15 years.
- The period for certain tax-advantaged and non-tax advantaged shares and share options reserved by third parties to be excepted from the disguised remuneration rules will also be extended to 15 years.
- The exception for Employee Ownership Trusts (EOTs) in the EMI rules will be extended to companies arranging to become controlled by an EOT.
- The EMI exercise window following disqualifying events will be extended to 180 days.
The changes will take effect from 6 April 2027.
Image rights payments
In 2025, Chancellor Reeves announced that all image rights payments related to an employment will be treated as taxable employment income and subject to income tax, employer NICs and employee NICs. This will affect sports people who set up image rights companies to accumulate payments for the rights. The change was set to come into effect in April 2027, but this Budget has deferred it until April 2028.
Claiming employment expenses
From 6 April 2028, the government will remove the £2,500 threshold that requires taxpayers to file a Self Assessment return to claim tax relief on employment expenses. Taxpayers with claims above £2,500 will be able to claim through PAYE using form P87 or the PAYE Expenses service, with supporting evidence.