A UK Guide on Holiday Pay For Employees on Vacation Posted on 7 October 20269 October 2026 by Farazia Gillani Holiday pay depends on how a worker is paid and whether their hours or earnings vary. For salaried employees with fixed hours and fixed pay, holiday is normally paid through their usual salary. Where earnings vary because of overtime, commission or other regular payments, employers may need to use an average-pay calculation instead. Different rules apply to irregular-hours and part-year workers, including the 12.07% accrual method and an optional method of paying holiday alongside normal wages. Businesses that need support applying these rules through their payroll services should make sure each employee’s working pattern and pay structure are classified correctly before calculations are made. This guide explains how to calculate holiday pay for salaried employees and other common working patterns in the UK. In US search terminology, holiday pay may sometimes be described as vacation pay, but UK employment guidance generally uses the terms ‘annual leave’ and ‘holiday pay’. How Much Paid Holiday Are Workers Entitled To? Most UK workers are legally entitled to 5.6 weeks of paid statutory holiday each year. For someone working five days a week, this normally means 28 days of statutory annual leave. Employers can include bank holidays within this statutory entitlement. Workers who work fewer days each week receive the equivalent entitlement on a proportional basis. Statutory holiday entitlement generally applies to: Full-time workers Part-time workers Agency workers Zero-hours workers Irregular-hours workers Part-year and seasonal workers Holiday entitlement normally begins to accrue from the start of employment. Get Free Consultation Call Anytime 0203 883 4777 Get Free Consultation Why Holiday Pay Matters in Payroll Holiday pay allows workers to take statutory annual leave without losing the pay they are entitled to receive. For employers, incorrect calculations can result in payroll errors, underpayments and employee disputes. Holiday pay should therefore be treated as part of normal payroll compliance alongside PAYE, National Insurance, pension contributions and statutory payments. The correct calculation depends on the worker’s hours, earnings and employment pattern rather than applying one method to every employee. How to Calculate Holiday Pay for Salaried Employees For employees who work regular hours and receive a fixed salary, the calculation is usually straightforward. Under the UK’s holiday pay rules, an employee with fixed hours and fixed pay will normally continue receiving their usual salary while taking statutory annual leave. Example: Fixed Salaried Employee Suppose an employee earns: Annual salary: £36,400 Their approximate weekly pay is: £36,400 ÷ 52 = £700 If they take one week of statutory annual leave and their hours and pay do not vary, they would normally continue receiving £700 for that week through their usual salary. For a monthly paid employee on fixed hours and fixed pay, employers will therefore normally continue the usual monthly salary rather than adding a separate holiday payment. What Counts as Normal Holiday Pay? Holiday pay becomes more complicated where an employee receives payments in addition to basic salary. For regular-hours workers, part of the statutory holiday entitlement must generally reflect normal remuneration, rather than basic salary alone. Depending on the employee’s circumstances, this can include: Regular overtime Commission linked to the employee’s work Payments related to length of service Payments related to seniority or professional qualifications Other regular payments that are intrinsically linked to the job The government’s holiday pay and entitlement reforms distinguish between normal remuneration and basic pay when calculating different parts of statutory leave. Employers should therefore review an employee’s actual pay structure rather than automatically basing every holiday payment on contractual basic salary alone. What If a Salaried Employee’s Pay Varies? Some salaried employees work regular hours but receive variable earnings because of commission, overtime or other regular payments. Where an average is required, employers may need to use a 52-week reference period when calculating holiday pay. Weeks in which the employee received no pay may need to be excluded, with earlier paid weeks used instead where the rules require this. Example: Variable Pay Suppose an employee received total relevant pay of: £31,200 over the previous 52 paid weeks Their average weekly pay would be: £31,200 ÷ 52 = £600 If one week of leave is calculated using that reference period, the holiday payment would therefore be approximately £600, subject to the applicable statutory rules. This is particularly important where overtime or commission causes an employee’s actual earnings to differ significantly from their basic salary. Holiday Pay for Irregular Hours Workers Holiday pay for irregular hours workers is calculated differently from holiday pay for someone on fixed salaried hours. For qualifying irregular-hours and part-year workers, the holiday entitlement rules introduced for leave years beginning on or after 1 April 2024 generally allow statutory holiday entitlement to accrue at 12.07% of the hours worked during each pay period. For example, if an irregular-hours worker completes 100 hours during a pay period: 100 × 12.07% = 12.07 hours The relevant statutory rounding rules are then applied. Because holiday pay for irregular hours workers depends on the worker meeting the legal definition of an irregular-hours or part-year worker, employers should confirm their working pattern before applying the 12.07% method. 12.07% Accrual and Rolled-Up Holiday Pay For qualifying irregular-hours and part-year workers, employers may choose to use rolled-up holiday pay. This means an additional holiday amount is paid alongside the worker’s normal wages rather than paying them separately when annual leave is taken. The additional amount must be calculated at at least 12.07% of the worker’s total pay during the relevant pay period and shown separately on the payslip. Example: 12.07% Holiday Payment Suppose an eligible irregular-hours worker earns: £1,500 during a monthly pay period The holiday payment would be: £1,500 × 12.07% = £181.05 The payslip would therefore show: Normal pay: £1,500 Holiday payment: £181.05 If an employer chooses rolled-up holiday pay, the employee must still be allowed to take their annual leave. Paying the additional amount does not replace their legal right to time away from work. Employers should not use this method for regular-hours salaried employees. Using the 52-Week Reference Period Employers do not have to use the rolled-up method for eligible irregular-hours or part-year workers. Where the relevant rules require average pay, holiday pay may instead be calculated using earnings from the previous 52 paid weeks. If an employee has unpaid weeks, those weeks may need to be excluded and earlier paid weeks used. The employer may need to look further back to obtain the required number of paid weeks. If the employee has not worked for the employer for a full 52 weeks, the available complete paid weeks are generally used. This approach is particularly useful where earnings fluctuate significantly throughout the year. Holiday Pay Tax: Is Holiday Pay Taxed in the UK? Yes. Holiday pay is normally treated as employment earnings and is therefore subject to PAYE Income Tax and National Insurance under the usual payroll rules. This means holiday pay is generally taxed the same way as ordinary wages. Employers should include holiday payments in gross earnings when running payroll and make the appropriate PAYE and National Insurance deductions. Accurate treatment also depends on correct submissions to HMRC, so employers should make sure their PAYE and RTI reporting reflects any holiday payments made through payroll. From the employee’s perspective, there is therefore no separate tax-free allowance specifically for holiday pay. Holiday pay tax is calculated through the normal payroll process alongside other taxable earnings. What Happens When Holiday Pay Is Paid in Advance? Some employers pay holiday amounts before an employee actually takes their annual leave. Where a single payment covers several future weeks, employers may need to follow HMRC’s specific PAYE treatment for holiday pay paid in advance. The correct treatment can depend on factors including: The employee’s normal pay frequency The number of earnings periods covered Their tax code National Insurance treatment How the advance payment is recorded through payroll Payroll software should therefore be configured correctly where payments cover more than one normal pay period. What Happens to Untaken Holiday When an Employee Leaves? When a worker leaves employment, they must normally be paid for statutory annual leave they have accrued but not taken. This is known as a payment in lieu of holiday. For example, if an employee leaves with three days of accrued statutory holiday remaining, payment for those three days should be included in their final pay. If the employee has already taken more holiday than they had accrued, the employer should only deduct the excess from final wages where the deduction has been agreed in the contract or otherwise agreed in writing beforehand. Contractual holiday provided above the statutory minimum may be treated differently depending on the employee’s contract. Holiday Pay Record-Keeping Rules From April 2026 From 6 April 2026, employers must keep more detailed records demonstrating compliance with annual leave and holiday pay requirements. Under the updated GOV.UK holiday pay guidance, relevant records should be retained for at least six years from the date they were created. Records may include: Annual leave taken Holiday entitlement Holiday payments made Relevant payroll calculations Records supporting the calculation method used Employers can choose how these records are maintained, but they should be able to demonstrate that workers have received the correct statutory holiday entitlement and pay. This is especially important for businesses employing a mixture of salaried, variable-pay, irregular-hours and part-year workers. Common Holiday Pay Mistakes Employers Should Avoid Holiday pay errors often arise when employers use the same calculation method for every employee. Common mistakes include: Applying the 12.07% accrual method to regular salaried employees Using the rolled-up method for workers who are not eligible Ignoring regular overtime or commission where it forms part of normal remuneration Using unpaid weeks incorrectly in an averaging calculation Failing to pay accrued statutory holiday when someone leaves Treating holiday pay as tax-free income Failing to show additional holiday payments separately where required Not maintaining sufficient holiday and payroll records Businesses should therefore distinguish between regular salaried employees, workers with variable earnings and qualifying irregular-hours or part-year workers before configuring payroll calculations. Best Practices for Managing Holiday Pay Employers can reduce errors by maintaining clear and consistent annual leave procedures. Good practice includes: Recording each worker’s employment and working pattern correctly Keeping HR and payroll records aligned Reviewing regular overtime, commission and other relevant payments Checking whether a worker qualifies as irregular-hours or part-year Showing additional holiday payments separately on payslips where required Reviewing outstanding leave before an employee leaves Keeping appropriate calculation and payment records Reviewing payroll procedures when contracts or working patterns change Clear records also make it easier to resolve employee questions and demonstrate compliance if calculations are challenged. How Apex Accountants Can Help With Holiday Pay and Payroll Holiday calculations are only one part of payroll compliance. At Apex Accountants, our payroll support can include: Salary and wage processing Holiday pay calculations PAYE and National Insurance RTI submissions Payslip preparation Starter and leaver processing Pension and auto-enrolment administration Statutory payments Payroll reporting and reconciliations Businesses managing different worker types can use outsourced payroll services to reduce the administrative burden of calculating wages, annual leave and statutory payments internally. Our team can help employers apply the appropriate holiday calculation method while keeping payroll records accurate and up to date. Get Free Consultation Call Anytime 0203 883 4777 Get Free Consultation Conclusion Understanding how to calculate holiday pay for salaried employees starts with identifying the employee’s working pattern and how their normal earnings are structured. For employees with regular hours and fixed salaries, holiday pay will usually continue through their normal salary. Where earnings vary because of overtime, commission or other regular payments, employers may need to calculate normal remuneration or use an appropriate reference period. Different rules apply to qualifying irregular-hours and part-year workers, including 12.07% holiday accrual and the option to pay holiday alongside normal wages. Employers should also account for PAYE, National Insurance, final-pay requirements and the record-keeping rules applying from April 2026. If you need help managing holiday calculations across different employee types, Apex Accountants can provide practical payroll support. Frequently Asked Questions About Holiday Pay How is holiday pay calculated for salaried employees? For employees with regular hours and fixed pay, holiday pay will normally be the same as the pay they would have received while working. A monthly salaried employee therefore normally continues receiving their usual salary while taking statutory annual leave. Is holiday pay taxed in the UK? Yes. Holiday pay is normally treated as taxable employment earnings. Employers generally include it within gross pay when calculating PAYE Income Tax and National Insurance. Can employers add holiday pay to every payslip? No. Paying an additional holiday amount alongside each pay period is only permitted under the statutory rules for qualifying irregular-hours and part-year workers. It should not normally be used for regular-hours salaried employees. How is holiday pay calculated when an employee’s earnings change? Where an average is required, employers generally use the relevant reference period based on previous paid weeks. Unpaid weeks may need to be excluded and replaced with earlier paid weeks when calculating the average. Who qualifies for statutory holiday pay? Most people legally classed as workers are entitled to paid statutory annual leave. This includes full-time, part-time, agency, zero-hours, irregular-hours and part-year workers, subject to the relevant employment status rules. What happens to unused holiday when an employee leaves? An employee must normally be paid for statutory holiday they have accrued but not taken when employment ends. Any deduction for excess holiday already taken should generally have been agreed beforehand in writing. What holiday records must employers keep from April 2026? From 6 April 2026, employers must keep records demonstrating compliance with annual leave and holiday pay requirements for at least six years from the date those records were created.
Employment Allowance UK: Employer NIC Relief Explained Posted on 2 October 20262 October 2026 by Rida Ahmed Employment Allowance UK can reduce an eligible employer’s secondary Class 1 National Insurance contributions by up to £10,500. For businesses with employees, the allowance can reduce payroll costs, support cash flow and make future recruitment more affordable. The maximum allowance remains £10,500 for 2026/27. Not every employer qualifies. Director-only companies, connected businesses and employers operating multiple payrolls can face additional restrictions, making it important to review the position before applying the relief. At Apex Accountants, we help employers assess whether Employment Allowance applies, calculate the potential employer NIC saving and make sure it is handled correctly through payroll. Businesses comparing today’s rules with the previous position can also review our Employment Allowance guide for 2020/21. The rules have changed considerably since 2021, so businesses that previously did not qualify may benefit from reviewing their position again. Employment Allowance Eligibility: Does Your Business Qualify? Employment Allowance is available to qualifying employers with secondary Class 1 National Insurance liabilities, subject to specific exclusions. HMRC confirms that businesses, charities and certain employers of care or support workers may qualify. A business doing less than half its work in the public sector can also potentially claim. A review is particularly worthwhile if your business: Has recently taken on its first employees. Operates through a company with one director. Has several companies under common ownership. Operates more than one PAYE scheme. Has recently changed its payroll or ownership structure. Previously believed it was too large to qualify. The former restriction based on more than £100,000 of employer Class 1 NIC no longer applies to current claims. Employment Allowance at a Glance Key PointCurrent PositionMaximum allowance£10,500Standard employer NIC rate15%Annual Secondary Threshold£5,000Previous £100,000 restrictionNo longer applies to current claimsApplication required each tax yearYesConnected companiesOne qualifying company can claim The £10,500 allowance, 15% standard employer NIC rate and £5,000 annual Secondary Threshold apply for 2026/27. Can a Single-Director Company Claim Employment Allowance? A company cannot claim where it has only one director, and that director is the only employee liable for secondary Class 1 NIC. HMRC also confirms that having other employees does not help if the director remains the only employee paid above the relevant secondary threshold. However, the position can change as the business grows. If another employee or director begins earning above the Secondary Threshold, the company may become eligible for the whole tax year, provided the other conditions are satisfied. For owner-managed businesses, this should be considered alongside salary and dividend planning. Our personal tax services can help directors review their personal liabilities alongside the company’s payroll and remuneration strategy. Get Free Consultation Call Anytime 0203 883 4777 Get Free Consultation How Connected Companies Affect Employment Allowance Businesses operating through several companies need to take particular care. Where companies are connected at the start of the tax year, only one qualifying company within the connected group can use the allowance. Companies can be connected where one controls another or the same person or people control both. This is an important consideration for business owners with multiple trading companies, separate payrolls or companies used for different activities. Rather than assuming each PAYE reference creates another entitlement, Apex Accountants can review the ownership structure and employer NIC liabilities to determine how the relief should be handled. How Much Could Employment Allowance Save Your Business? The commercial value depends on the amount of qualifying employer NIC your business would otherwise pay. Consider an eligible business with four employees earning £25,000 each. Example Employer NIC Saving CalculationAmountSalary per employee£25,000Secondary Threshold£5,000Earnings above threshold£20,000Employer NIC at 15% per employee£3,000Employer NIC for four employees£12,000Less Employment Allowance£10,500Employer NIC remaining£1,500 This simplified example shows how the allowance could reduce employer NIC from £12,000 to £1,500. For a growing business, that saving can support working capital, recruitment, employee development or wider investment. It should therefore be considered when forecasting staffing costs rather than only when PAYE becomes payable. How to Make an Employment Allowance Claim Employers normally apply through compatible payroll software by selecting the relevant Employment Allowance indicator and submitting an Employer Payment Summary to HMRC. A new application is required for each tax year. Applying earlier means an eligible business can start benefiting from the reduction in employer NIC sooner. Where Apex Accountants manages or reviews your payroll, we can check the position before the allowance is applied and help ensure the PAYE treatment reflects the business’s circumstances. Have You Missed Employment Allowance in an Earlier Tax Year? Employers that failed to apply in an earlier year may still have an opportunity to recover missed relief. HMRC currently states that claims may be possible for the previous four tax years, but the rules applying to the individual historical year must be considered. This matters because older Employment Allowance rules were different. For example, our 2020/21 guide covered a lower maximum allowance and restrictions that no longer apply to current claims. A historic payroll review may therefore be worthwhile if your business: Did not apply because it believed it was ineligible. Changed accountants or payroll providers. Added employees after beginning the year as a director-only company. Operated several companies or payroll schemes. Has not reviewed Employment Allowance for several years. Apex Accountants can review earlier payroll periods and assess whether an eligible amount remains available. Common Employment Allowance Errors That Can Cost Your Business Errors can result in incorrect PAYE liabilities, additional administration and unnecessary HMRC adjustments. Some of the issues we see businesses needing to check include: A single-director company applying when it does not qualify. More than one connected company using the allowance. Assuming each PAYE scheme has a separate allowance. Failing to make a fresh application for the new tax year. Applying today’s rules to a historic payroll period. Missing relief that could legitimately have been used. If your business has made a missed or incorrect employment allowance claim, we can review the payroll treatment and determine whether a correction or earlier-year application is appropriate. Get Free Consultation Call Anytime 0203 883 4777 Get Free Consultation Employment Allowance and the Cost of Hiring Staff Taking on an employee involves more than the headline salary. Businesses should consider employer NIC, pension contributions, payroll administration and wider employment obligations when deciding whether a new hire is affordable. Employment allowance can reduce part of that employer NIC cost for qualifying businesses, making it particularly relevant when preparing recruitment and cash-flow forecasts. Our employment law services can also support growing employers with the contracts, policies and employment processes needed as their workforce expands. Looking at payroll tax and employment obligations together gives business owners a clearer picture of the real cost of taking on staff. How Apex Accountants Helps Employers Reduce Payroll Risk and Cost Employment Allowance should not be treated as another payroll box to tick. The important question is whether your business qualifies, how much it could actually save and whether the claim fits your wider payroll structure. At Apex Accountants, we review employment allowance eligibility alongside employer NIC and payroll arrangements to identify legitimate savings without creating unnecessary compliance risk. We can help with: Checking single-director and connected-company restrictions. Calculating potential employer NIC savings. Applying the allowance correctly through payroll. Reviewing previous tax years for missed relief. Correcting inaccurate payroll treatment. Forecasting payroll costs before recruiting. Whether your business has recently started employing staff or has an established payroll that has not been reviewed for several years, the potential saving can justify checking the position. Contact Apex Accountants for a free consultation to review your payroll and employment allowance position. FAQs About Employment Allowance Tax Relief Can a Single-Director Company Claim? Not where the director is the only employee liable for secondary Class 1 NIC. The position can change if another employee or director earns above the relevant secondary threshold. Can Connected Companies Each Claim £10,500? No. Where companies are connected for employment allowance purposes, only one qualifying company in the group can claim. Does the Previous £100,000 Limit Still Apply? No. HMRC confirms that employers with more than £100,000 of Class 1 NIC liabilities can apply under the current rules. Earlier tax years are subject to different conditions. Do Employers Need to Apply Every Year? Yes. The employment allowance must be claimed for each tax year and does not automatically carry forward. Can a Business Claim Employment Allowance Late? Potentially. Employers can apply during the current tax year, and qualifying claims may also be possible for earlier tax years within HMRC’s applicable time limits.
Payrolling Benefits in Kind: What Employers Must Do by 2027 Posted on 16 September 202618 September 2026 by Fasih Zubair From 6 April 2027, the way UK employers report some benefits in kind will change significantly. Company cars, car fuel, vans, van fuel and employer-provided medical benefits will have to be reported through payroll in real time rather than through the usual year-end P11D process. Most other benefits will follow from April 2028. However, employment-related loans and accommodation are currently excluded from mandatory payrolling and will remain voluntary until the government confirms otherwise. For businesses providing taxable benefits to employees, preparation should start well before April 2027. Key takeaways Mandatory payrolling starts on 6 April 2027 for company cars, car fuel, vans, van fuel and employer-provided medical benefits. Most other benefits in kind become mandatory from April 2028. Employment-related loans and accommodation remain outside mandatory payrolling for now. Both Income Tax and employer Class 1A National Insurance contributions will be reported in real time for mandatorily payrolled benefits. P11Ds will still be required for benefits that remain outside mandatory payrolling. Employers do not need to register for the benefits that become mandatory in April 2027. HMRC plans to remove affected benefits from employees’ tax codes before mandatory payrolling begins. What is payrolling of benefits in kind? Payrolling benefits in kind means including the taxable value of an employee’s benefit in each payroll run instead of relying on year-end reporting. For example, if an employee receives a medical benefit worth £600 for the year, the employer would normally include £50 of taxable benefit in each monthly payroll period. That amount is added for Income Tax purposes rather than being additional cash paid to the employee. HMRC’s current mandatory payrolling guidance confirms that employers will report affected benefits through payroll software using Real Time Information. Employers have been able to payroll certain benefits voluntarily for several years. From April 2027, however, payrolling becomes compulsory for the first group of benefits. What changes from 6 April 2027? The original mandatory payrolling start date was April 2026, but the government delayed implementation to provide employers, agents and payroll software developers with more time to prepare. From 6 April 2027, mandatory payrolling applies to: Company cars Car fuel Vans Van fuel Employer-provided medical benefits, including relevant private medical cover These benefits must be reported through the employer’s Full Payment Submission. HMRC’s reporting requirements confirm that the taxable benefit and associated Income Tax and Class 1A National Insurance contributions will be reported in real time. Employers operating company car schemes should pay particular attention to data quality. The taxable benefit can depend on factors including the car’s list price, CO₂ emissions, fuel type and availability. Our guide to company car tax bands explains how the taxable value is calculated. What happens from April 2028? From April 2028, mandatory payrolling is expected to extend to most remaining benefits in kind. There is an important exception. Employment-related loans and accommodation are not currently scheduled to become mandatory in April 2028. HMRC says these benefits will remain available for voluntary payrolling, with any future mandatory date to be confirmed separately. Employers should therefore avoid treating April 2028 as the complete abolition of the P11D system. What happens to P11D forms? P11Ds will not disappear in April 2027. For the 2027/28 tax year, benefits outside phase one will generally still need to be reported under the existing year-end arrangements unless they are voluntarily payrolled. This means a business providing company cars and private medical benefits alongside another non-mandatory benefit could payroll the cars and medical benefits throughout 2027/28 while continuing to report the other benefit after the tax year. Even after April 2028, P11D and P11D(b) reporting can continue to be relevant for benefits such as loans and accommodation that have not been voluntarily payrolled, as well as certain excluded cases. Class 1A National Insurance also changes. The employer remains responsible for the contribution, but for mandatorily payrolled benefits it will be calculated, reported and paid through the real-time process rather than solely through the traditional year-end P11D(b) route. What employers should do now 1. Review and clean benefit data Benefit records should be checked well before the first mandatory payroll run. For company cars, make sure information such as list price, registration details, CO₂ emissions, fuel type, employee availability dates and changes during the year is accurate. For medical benefits, employers need reliable information about the taxable cost attributable to each employee. Incorrect data can lead directly to incorrect payroll calculations. 2. Do not register for mandatory benefits Employers do not need to register to payroll company cars, car fuel, vans, van fuel or medical benefits from April 2027. HMRC’s preparation guidance states that these benefits will enter mandatory payrolling automatically. A voluntary registration service is instead due to open in November 2026 for employers wishing to payroll benefits that are not mandatory during phase one. The registration deadline for the 2027/28 tax year is 5 April 2027. 3. Check your payroll software Employers should confirm that their software provider will support the additional benefit-in-kind information required through RTI. HMRC expects updated technical specifications to be available to software providers in autumn 2026. Businesses using outsourced payroll services should also confirm how their provider will collect benefit information and handle changes during the tax year. 4. Brief employees before April Employees may notice the tax on benefits more clearly through their regular payslips once payrolling becomes mandatory. Explaining the change beforehand can reduce queries, particularly for employees receiving company cars or medical benefits. HMRC has said it will automatically remove mandatorily payrolled benefits from affected employees’ tax codes for the start of the 2027/28 tax year, helping prevent the same benefit being taxed through both the code and payroll. 5. Prepare for changes during the year Benefits do not always remain unchanged for 12 months. A company car may be replaced, an employee may join or leave midway through the year, or the taxable cost of a medical benefit may change. HMRC’s real-time approach allows the annual taxable value to be recalculated and the remaining amount spread across the remaining pay periods. Employers should establish a process for passing these changes to payroll quickly. 6. Plan for the Class 1A NIC cash-flow overlap There is also a one-off cash-flow consideration in 2027. Employers may still have Class 1A National Insurance to pay in July 2027 for benefits provided during 2026/27, while simultaneously starting to pay Class 1A NIC in real time on benefits provided during 2027/28. Businesses should account for this overlap when planning payroll-related cash flow. A worked example: payrolling a company car Assume a director has a company car with an annual taxable benefit of £6,000. Under mandatory payrolling, the employer would normally spread that amount across 12 monthly pay periods: £6,000 ÷ 12 = £500 taxable benefit per month If the employee pays Income Tax at 20%, the additional tax attributable to the benefit would be £100 per month. At a 40% Income Tax rate, it would be £200 per month. The £500 is not additional salary paid to the director. It is included in the payroll calculation so the appropriate tax can be collected as the benefit is provided. If the car changes during the year and the annual taxable value changes, the employer recalculates the benefit, deducts the amount already payrolled and spreads the remaining taxable amount over the remaining pay periods. Get Free Consultation Call Anytime 0203 883 4777 Get Free Consultation Does this change business expenses? Ordinary business expenses that are paid or reimbursed and qualify fully for tax relief remain exempt and normally do not need to be reported as benefits in kind. Different rules can apply where an expense is taxable or does not qualify fully for relief. Employers should therefore distinguish between genuine business expenses and taxable employee benefits rather than treating all expense payments in the same way. Employees may also be able to claim tax relief on qualifying work-related expenses where the relevant conditions are met. FAQ Is the P11D being abolished? Not completely. P11Ds will stop being the normal reporting method for benefits brought into mandatory payrolling, but they will continue to have a role for benefits and circumstances that remain outside the mandatory regime. Loans and accommodation, for example, are currently expected to remain voluntary even after April 2028. Can I start payrolling before it becomes mandatory? Existing voluntary arrangements can continue where an employer registered in time for the 2026/27 tax year. For 2027/28, HMRC plans to reopen voluntary registration in November 2026 for benefits that are not part of the mandatory phase-one group. There is no need to register company cars, car fuel, vans, van fuel or medical benefits for April 2027 because those categories become mandatory automatically. What happens if I do nothing before April 2027? Employers providing benefits covered by phase one will still be required to report them through payroll from 6 April 2027. HMRC has announced a first-year easement for certain non-deliberate inaccuracies in mandatory RTI reporting during 2027/28. However, deliberate non-compliance is not protected, and normal late-filing, late-payment and statutory interest rules can still apply. Businesses should therefore use the remaining preparation period to review their records, software and payroll procedures. Will employees be taxed twice? HMRC says it intends to remove the mandatorily payrolled benefits from affected employees’ tax codes before 6 April 2027. Employers should nevertheless make sure benefit information is accurate and encourage employees to check their tax codes and payslips when the new system begins. How Apex can help Moving benefits into real-time reporting affects much more than a single payroll field. Employers need accurate benefit records, suitable software, reliable employee data and processes for handling changes throughout the year. Apex Accountants & Tax Advisors provides payroll services for UK businesses, including PAYE calculations, RTI submissions, payroll records, workplace pension administration and ongoing payroll compliance. We can also help businesses review their benefit data, prepare payroll processes for the April 2027 transition and coordinate benefit reporting with wider payroll obligations. With mandatory payrolling approaching, preparing the data and process early can make the first real-time reporting year considerably easier.
Claiming tax relief for working from home Posted on 9 December 202114 July 2025 by Mohsin Khan Employees working from home may be able to claim tax relief for certain home-related bills they pay that are related to your work. Employers may reimburse employees for the additional household expenses incurred through regularly working at home. The relief covers expenses such as business telephone calls or heating and lighting costs for the room in which you are working. Expenses that are for both for private and business use (such as broadband) cannot be claimed. Employees may also be able to claim tax relief on equipment they have bought, such as a laptop, chair or mobile phone. Employers can pay up to £6 per week (or £26 a month for employees paid monthly) to cover an employee’s additional costs if they have to work from home. Employees do not need to keep any specific records if they receive this fixed amount. If the expenses or allowances are not paid by the employer, then the employee can claim tax relief directly from HMRC. Employees will get tax relief based on their highest tax rate. For example, if they pay the 20% basic rate of tax and claim tax relief on £6 a week, they will get £1.20 per week in tax relief (20% of £6). Employees can claim more than the quoted amount but will need to provide evidence to HMRC. HMRC will accept backdated claims for up to 4 years. These tax reliefs are available to anyone who has been asked to work from home on a regular basis, either for all or part of the week including working from home because of coronavirus. Source: HM Revenue & Customs Tue, 07 Dec 2021 00:00:00 +0100
Reminder for reporting expenses and benefits for 2020-21 Posted on 30 June 20212 July 2025 by Rana Zubair The deadline for submitting the 2020-21 forms P11D, P11D(b) and P9D is 6 July 2021. Employees must also be provided with a copy of the information relating to them on these forms by the same date. P11D forms are used to provide information to HMRC on all Benefits in Kind (BiKs), including those under the Optional Remuneration Arrangements (OpRAs) unless the employer has registered to payroll benefits. This is known as payrolling and removes the requirement to complete a P11D for the selected benefits. However, a P11D(b) is still required for Class 1A National Insurance payments regardless of whether the benefits are being reported via P11D or payrolled. Where no benefits were provided during 2020-21 and a form P11D(b) or P11D(b) reminder is received, employers can either submit a 'nil' return or notify HMRC online that no return is required. Employers should ensure that they complete their P11D accurately, including all the details of cars and loans provided. There are penalties for late filing of returns. Employers pay Class 1A National Insurance contributions on most benefits. If you provided taxable benefits to staff or directors your business is likely to have a Class 1A employers’ NIC liability. The deadline for paying class 1A NICs is 22 July 2021 (or 19 July if paying by cheque). In addition, any tax or National Insurance due for 2020-21 under a PAYE Settlement Agreement (PSA) needs to be paid electronically to clear into HMRC’s bank account by 22 October 2021 (19 October 2021 for payments by cheque). Source: HM Revenue & Customs Tue, 29 Jun 2021 00:00:00 +0100
Taxable benefit charge – returning office equipment Posted on 30 June 202122 May 2025 by Rana Zubair A taxable benefit charge can apply when employees return office equipment they used to work from home. There was a significant rise in the provision of office equipment to employees working from home due to the COVID-19 pandemic. Qualifying home office equipment is that deemed necessary for an employee to work from home and can, for example, include a laptop, mobile phone, office desk and chair and other necessary computer accessories such as webcams. Taxable benefit charges are as follows: If you supplied your employees with office equipment so they could work from home, and you did not transfer ownership, there is no tax charge when they return the equipment to you. If you transfer the ownership of home office equipment to an employee at any stage of their employment, a benefit charge generally arises on the market value of the equipment at the time of the transfer, less any amount made good by the employee. If your employee has agreed to purchase home office equipment for use whilst working at home due to COVID-19 and you reimburse the exact expense, unless you have specified that your employee must transfer ownership to you, the ownership of the equipment rests with your employee. There is no benefit charge on the reimbursement. There is also no benefit charge if you allow your employee to keep the equipment as it is something that they already own. Source: HM Revenue & Customs Tue, 29 Jun 2021 00:00:00 +0100
Employees Tax Relief For Working From Home Posted on 18 February 20213 July 2025 by Rana Zubair These days due to COVI19 most of the employees are working from home. These employees may be able to claim tax relief for any additional costs due to working from home. No tax relief will be due if employers reimburse employees for the additional household expenses incurred. What is covered: The tax relief covers expenses such as business telephone calls or heating and lighting costs. Expenses that are for both for private and business use (such as broadband) cannot be claimed. Employees may also be able to claim tax relief on equipment purchased. For example, a laptop, chair or mobile phone. Have a look at our Corporation tax page, we are able to advise on which reliefs a business could claim. Since 6 April 2020, employers can pay up to £6 per week (or £26 a month for employees paid monthly) to cover an employee’s additional costs if they have to work from home. Employees do not need to keep any specific records if they receive this fixed amount. If the expenses or allowances are not paid by the employer, then the employee can claim tax relief directly from HMRC. Employees will qualify for tax relief based on their highest tax rate. For example, if they pay the 20% basic rate of tax and claim tax relief on £6 a week they would receive £1.20 per week in tax relief (20% of £6). Employees can claim more than HMRC’s fixed amounts but may need to provide evidence to HMRC of the amount claimed. This is important to note, that if an employee is working at home voluntarily, they cannot claim tax relief. However, these tax reliefs are available to anyone who has been asked to work from home due to the COVID-19 outbreak. If you are looking to know more this new and related laws; feel free to book a free consultation.
Tax Relief For Work Related Expenses Posted on 24 September 20201 July 2025 by Rana Zubair The employees are required to buy equipment to use as part of their employment may be able to claim tax relief based on the cost of the equipment acquired. In most cases you can claim tax relief on the full cost of this type of equipment as it usually qualifies for a type of the Capital Allowance called annual investment allowance. Any tax relief would be reduced if the employer provides a contribution towards buying the item. The way to claim tax relief depends on the amount you’re claiming. HMRC provides the following information on making a claim: Claims up to £2,500 You should make your claim: using a Self-Assessment tax return if you already fill one in online or by printing and posting form P87 if you don’t already fill in a tax return by phone if you’ve had a successful claim in a previous year and your expenses are less than £1,000 (or £2,500 for professional fees and subscriptions) Claims over £2,500 You can only claim using a Self-Assessment tax return. You will need to register if you don’t already complete a return. There are different rules for employees who use their own uniforms, work clothing, and tools for work. It is possible to claim for the cost of repairing or replacing small tools you need to do your job (for example, scissors or an electric drill), or cleaning, repairing or replacing the specialist clothing (for example, a uniform or safety boots). A claim for valid purchases can be made against receipts or as a ‘flat rate deduction’. However, an employee cannot claim relief on the initial cost of buying small tools or clothing for the work. ‘Tax relief’ means that you either: payless tax to take account of the money you’ve spent on specific things, like business expenses if you’re self-employed get tax back or get it repaid in another way, like into a personal pension https://www.gov.uk/tax-rel-for-employees/working-at-home Source: HM Revenue & Customs Wed, 23 Sep 2020 00:00:00 +0100
Tax Relief For Working From Home Posted on 17 September 202014 July 2025 by Rana Zubair Tax Relief For Working From Home If you have not yet received compensation from your employer you can still claim tax relief for some expenses that result from Working from home. HMRC will usually allow you to claim tax relief if you use your own money for things that you must buy for your job and you only use these items for work. You must make a claim within 4 years of the end of the tax year that you spent the money. For example, if you use your own uniforms, work clothing, and tools for work. It is possible to claim for the cost of repairing or replacing small tools you need to do your job as an employee (for example, scissors or an electric drill), or cleaning, repairing or replacing specialist clothing (for example, a uniform or safety boots). A claim for valid purchases can be made against receipts or as a ‘flat rate deduction’. However, you cannot make a claim for relief for the initial cost of buying small tools or work clothing. You may also be able to claim tax relief for using your own vehicle, be it a car, van, motorcycle or bike. As a general rule, there is no tax relief for ordinary commuting to and from your work. The rules are different for temporary workplaces where the expense is usually allowable and if you use your own vehicle to do other business-related mileage. Note, that if you have agreed with your employer to work at home voluntarily, or you choose to work at home, you cannot claim tax relief on the bills you have to pay. https://www.gov.uk/tax-relie-for-employees/work-at-home Source: HM Revenue & Customs Sun, 13 Sep 2020 00:00:00 +0100
