Welcome to our latest monthly update, the first of the 2025/26 tax year, which covers some of the recent developments.
HMRC’s Check for Employment Status for Tax (CEST) updated!
The government announced that HMRC would be revising its CEST digital tool with effect from 30 April 2025 as part of its Spring Tax Update (simplification, administration, and reform summary). According to HMRC, these changes will make CEST easier to use. In addition, HMRC will provide revised guidance on how to respond to the revised questions. In cases where this tool is used correctly, HMRC stands behind it.
The CEST revision will be eagerly awaited by employment tax professionals to see if it is now fit for the purpose.
P11D reporting
Following the end of each tax year, employers need to turn their attention to employer compliance reporting. This will include reporting any taxable benefits provided to employees, employment related securities and any redundancy or termination payments where the total package exceeds £30,000.
For further details please read the following article (link here).
PAYE settlement agreements
Employers often use a PAYE settlement agreement to meet the income tax and National Insurance (‘NI’) liabilities which would otherwise fall on to the employee. The following article (link here) provides a helpful summary, especially if you are an employer who has not previously made use of a PSA.
Double pick-up vehicles
The Government announced further changes to the tax and NIC treatment of double pick-up vans. Whilst the changes offer some easement to the significant increase to the benefit in kind charge, the rules are a bit cumbersome to follow. Further details are included in the following article (link here)
New rules for international employees
If you employ any internationally mobile employees and you want to minimize their UK tax burden, we summarize the changes to the rules within the following article (link here)
Changes to company size thresholds for Off payroll working (‘OPW’) & student and post graduate loan deductions
- Following on from last month’s edition, HMRC has confirmed that the thresholds will have no practical impact for OPW until April 2027 at the earliest due to the threshold being determined by reference to previous years (link here).
- Student or post graduate loan payments cannot be deducted from payments to OPW workers who have been classed as deemed employees. Deemed employees can make these payments via their Self-Assessment Tax Returns (‘SATR’).
Employment allowance & Small Employers’ Relief compensation rate
- To compensate for the increase in employers NI from 13.8% to 15%, the maximum amount of Employment allowance has increased from £5,000 to £10,500 from 6 April 2025. The £100,000 NI threshold has also been removed (link here).
- The Small Employers’ Relief compensation rate also increased to 8.5%, as a result of aligning it with changes to employer NI (link here)
