The government has announced a package of measures that are intended to simplify, modernise and make fairer the tax and customs system.
These measures include several issues that will be of interest to those involved in employment tax, including PAYE Settlement Agreements (“PSAs”), NIC underpayments, expenses and international issues. A summary of some of these are below:
Call for evidence on PAYE Settlement Agreements (PSAs)
This call for evidence runs up until 15 September 2026. It clarifies the purpose of PSAs and seeks to understand how employers determine what to include in PSAs, the basis of calculation and how they are used in conjunction with other reporting arrangements.
It is not known yet whether the government intends to make any changes to these arrangements.
Removing NIC debt from the Limitation Act
In England and Wales, liability for NIC underpayments is currently covered by the Limitation Act 1980. This generally means a 6-year time limit on recovery. A similar timescale applies in Northern Ireland, whereas in Scotland there is a general 20-year time limit.
There is clearly a mismatch between how historical tax and NIC debts are treated. The government is to consult on proposals to remove NIC debt from the scope of the Limitation Act and to align NIC recovery processes more closely with other forms of taxation. The consultation is to be issued this summer.
Review and uprating of Benchmark Scale Rates (“BSR”) and Overseas Scale Rates (“OSR”)
The BSR are optional flat rates that employers can use to reimburse employees for the cost of meals when they travel for work in the UK and the OSR are for accommodation and meals when they travel overseas.
They reduce the administrative burden of retaining receipts for every expense. The BSR has not been updated for some years and often does not cover the actual cost of expenses. They will be reviewed with consideration for the current costs of travel and to consider simplification and possible alignment of the two arrangements.
Regularising NIC easements for internationally mobile individuals
The existing NIC easement for non-resident directors who attend a small number of board meetings in the UK and are based in countries without a social security agreement is to be formalised “to ensure a consistent application of the rules”.
Also, there will be a review of the NIC easement that allows certain employees posted abroad by their employer to work in a country with no social security agreement to return to the UK for short periods without them needing to pay additional Class 1 National Insurance contributions.
Review of employment expenses within Self Assessment
The government plans to review the circumstances in which HMRC’s “customers” can make claims for tax relief on non-reimbursed employment expenses to “ensure requirements are effective and proportionate”.
Currently, employees who incur more than £2,500 of allowable expenses not already reimbursed by their employer must submit a Self Assessment return to claim relief.
More timely payments for Income Tax Self Assessment (ITSA)
The government has published a consultation seeking views on implementing more timely payments in ITSA, including reforms for ITSA customers with Pay as You Earn (PAYE) income who will be required to pay more of their forecasted Self Assessment liabilities through PAYE throughout the year from April 2029.
The government is also consulting on the potential for more timely payments for other Self Assessment taxpayers by reforming Payments on Account.
HMRC says that spreading tax payments through the year into smaller, regular payments will help reduce tax debt and avoid taxpayers having to pay larger, infrequent and sometimes unexpected bills.
Payment of PAYE by Direct Debit
A consultation is seeking views on requiring PAYE payments to be made by direct debit. The consultation runs to 16 August 2026 and considers practical barriers, implementation issues and where exceptions may be needed.
Summary
It is too early to say what changes these announcements will lead to, but it is likely that some will be welcome whilst for other employers, keeping abreast of any changes at a time when many are already preparing for payrolling of benefits in kind may be an added burden.
UNW’s employment tax team has significant experience on employment tax matters and if you would like to discuss how we can help you, or have any other employment taxes related queries, please get in touch with us at employmenttaxesteam@unw.co.uk
