Employer Bulletin: February 2026

HMRC have published their Employer Bulletin for February 2026. Key content includes a new release of HMRC's free Basic PAYE Tool, Benefit In Kind reporting, the new student loan plan, National Insurance Contributions (NICs) for veterans, overseas NICs changes and upcoming reporting deadlines.

Basic PAYE Tools: new release

Basic PAYE Tools (BPT) is free payroll software from HMRC for businesses with fewer than 10 employees.

• An update to the BPT will be released at the end of March to support the 2026-27 tax year. 
• It is important that employers update and use version 26.0 from 6 April 2026.

To update or check for updates, select 'Check now' in the update section of the tool's settings. 

• It is also recommended that the automatic update be set to 'Yes'.

Before new employers can use BPT to run a payroll, they must have registered for online PAYE as instructed in their new employer letter.

Taxed Award Scheme (TAS)

Third-party companies may be engaged to provide non-cash incentive awards, such as benefits or non-cash vouchers, to employees on behalf of their employer. 

• Tax and Class 1A National Insurance Contributions (NICs) are due on any such awards. 
• If you are a provider of such awards, you should use a TAS to make a payment to HMRC covering the tax liability due on awards you make. 

Employees must report the award on their tax return.

• You must provide the grossed-up value of the award and the tax paid on it so they can do this. 
• It is unlikely they will have to pay any further tax if a TAS covers their award, unless they are liable to pay tax at a higher rate and the TAS only covers the basic rate.

The Incentive Award Unit (IAU) handles all aspects of a TAS, including the valuation of awards and the type of contractual arrangement.

A TAS for awards given in the 2025-26 tax year must be agreed by 6 July 2026.

Upcoming State Pension age changes: impact on payroll operation

From 6 April 2026, the State Pension age for men and women will increase from 66 to 67.

• The increase will be phased in over the course of two years, meaning that people born between 6 April 1960 and 5 March 1961 will reach their State Pension age at 66 years and a specified number of months. 

Use the State Pension age calculator to find the date when your employees will reach State Pension age. 

If you have employees born between 6 April 1960 and 5 March 1961, you should check the date they reach State Pension age so you can update their NI category letter at the correct time.

• This is the first payment date after they have reached State Pension age.
• You must carry on reporting the original category letter year-to-date information separately from the updated category letter information until the end of the tax year, as you would for any other mid-year category letter change.

See State Pension Age

Payrolling Benefits In Kind (BIKs): important dates

HMRC are reminding employers of an important deadline as part of preparations for reporting BIKs in real time, as outlined in the interim guidance.

• This guidance, published alongside the Autumn Budget 2025, helps stakeholders understand the upcoming changes and prepare for the mandatory payrolling of most BIKs, which you must do from April 2027.
• Guidance will be updated regularly to include further details.

Voluntary payrolling deadline 5 April 2026

• The deadline to register for voluntary payrolling of BIKs in the 2026-27 tax year is 5 April 2026.
• Employers wishing to payroll BIKs for the first time should make sure they complete the registration process before the start of the next tax year.
  • Voluntary registration is not possible once the tax year has begun. 
• From 6 April 2026, the current voluntary registration tool will close. 
  • This change reflects the move to mandatory payrolling for most BIKs from the 2027-28 tax year onwards.
  • Under the new process, most employers will not need to register for voluntary payrolling because payrolling will be mandatory for most BIKs. 

Mandatory payrolling of BIKs and expenses

• HMRC continue to work closely and discuss the changes with stakeholders to ensure they are clear, practical and as easy to implement as possible.
  • Further updates to guidance will be issued based on feedback.
• To help businesses get ready, interim guidance and technical specifications have been published much earlier than usual. 
  • HMRC will provide more details as they continue to develop policy and receive feedback.
• Employers are encouraged to review the interim guidance, which provides a timeline of future updates and delivery.

Loans and living accommodation

• The guidance also sets out additional plans to make payrolling of employment-related beneficial loans and living accommodation, voluntary in the 2027-28 tax year.
• A new registration service will be introduced for those employers wishing to voluntarily payroll employment-related beneficial loans and living accommodation. 
  • Details will be provided later this year. 

See Mandatory payrolling of benefits from April 2027: Briefing and Payrolling of benefits

Reporting expenses and benefits for the tax year ending 5 April 2026

P11D and P11D(b) deadlines:

• For those employers who do not yet payroll expenses and benefits, the deadline for reporting P11D(b) Class 1A NICs, P11D expenses and BIKs provided in the 2025-26 tax year is 6 July 2026.
  • All P11Ds and a P11D(b) for the 2025-26 tax year must be filed online at the same time. 
• Late submission may result in a penalty.
  • HMRC charges penalties monthly and issues penalty notices each quarter until a return is received. 

Common errors on P11D submissions

• When submitting car data on your P11D submissions, make sure you correctly record:
  • The date the car was first registered.
  • The fuel type.
  • The CO2 emission figure: for fully electric cars, you need to put a zero.
  •  The zero-emission mileage figure when the CO2 is between 1 and 50g per km.
  • The engine size (cc).
  • A figure in the cash equivalent box.
  • A figure in the cash equivalent box when you have a figure in the total cash equivalent or amount forgone on all cars. 
• When submitting information about beneficial loans, make sure you correctly record:
  • A figure in the cash equivalent or relevant amount of loans after deducting any interest paid.
  • Dates the loan was made available in the 'from' and 'to' boxes. 
• If you provide joint beneficial loans to your employees, remember to divide the total cash equivalent figure by the number of employees on the joint beneficial loan and use this final figure to complete the cash equivalent for each employee on their P11D before you file your returns.
• If the final cash equivalent figure is nil, record this as £0.00 on the P11D before submission. 

If you make a mistake and need to submit an amendment, be aware that HMRC no longer accept paper amendments.

See P11D: Reporting benefits and expenses

Student loans: reminder of new Plan 5 for 2026-27 tax year

Employers are reminded that from 6 April 2026, a new student loan, Plan 5, will be introduced into repayment for the first time.

• Plan 5 will be operated and collected in the same way as the current plan types 1, 2 and 4.

Employers will begin receiving student loan start notices in March 2026 for all borrowers due to enter repayment from April 2026, and include all new Plan 5 borrowers.

• The start notice will indicate the loan and plan type which should be collected.

As communicated in the December 2025 Employer Bulletin, the starter checklist, both online and PDF, will be updated in March 2026 to include Plan 5.

• Employers are encouraged to advise any employees who do not know what plan they are repaying that they can find out by logging into their online student loan account. 
• Until 5 April 2026, when employers are still uncertain what plan to use, they should use Plan 1 until a start notice is received.
  • From 6 April 2026, this default plan will change to Plan 5.
• Where employees have selected more than one plan, employers should start deductions using the plan with the lowest repayment threshold. 

Ahead of the guidance being updated on 6 April 2026, when the changes take effect, employers are also reminded that the new annual thresholds will be:

• Plan 1: £26,900.
• Plan 2: £29,385.
• Plan 4: £33,795.
• Plan 5: £25,000.
• Postgraduate loan: £21,000.

Deduction rates from 6 April 2026 for Plans 1, 2, 4 and 5 remain at 9%, and the postgraduate loan remains at 6% for any earnings above the respective thresholds.

See Student Loans

Electronic payment deadline falls on a weekend

The electronic payment deadlines fall on a Sunday on 22 February 2026 and 22 March 2026.

• To ensure your payment for these months reaches HMRC on time, you need to have funds cleared into HMRC's account by 20 February 2026 and 20 March 2026, unless you can arrange a Faster Payment. 

It is your responsibility to make sure your payments are made on time.

• If your payments are late, you may be charged a penalty.

Check your bank or building society's single transaction daily value limits and cut-off times well in advance of making your payment.

• Make sure you know when to initiate your payment, so it reaches HMRC on time.

See Penalties: PAYE and late payment

End of year reporting

It is time to prepare for making your last Full Payment Submission (FPS) or Employer Payment Summary (EPS) of the year. 

• Your last FPS or EPS of the year, up to and including 5 April 2026, must include an indicator that you are making the final submission. 
• This tells HMRC you have sent them everything you expected to send, and they can finalise their records for you and your employees. 

Some commercial payroll software will not allow you to put the indicator on an FPS.

• If that is the case, send your last FPS and then send an EPS with the indicator ticked. 
• You can also send an EPS with the indicator ticked if you forgot to put the indicator on your last FPS submission for the tax year. 

You also need to prepare to give your employees a P60 if they are in your employment on 5 April 2026.

• This information must be provided by the employee by 31 May 2026.

If you are not going to pay anyone again this tax year, remember to send an EPS with the indicator ticked to show you did not pay anyone in the final pay period and that it is the final submission.

• You have until 19 April 2026 to do this.
• If you have not filed by 11 April 2026, you will receive a reminder notification from the Generic Notification Service.

Introduction of new miscarriage entitlement and day one rights for Parental Bereavement Leave and Pay in Northern Ireland

The Department for the Economy in Northern Ireland intends to introduce significant changes to Parental Bereavement Leave and Pay.

• These changes will apply to parents who suffer the loss of a child under the age of 18, including stillbirth from 24 weeks of pregnancy, and now extend to miscarriage entitlement, which includes both spontaneous loss and specified medical interventions. 

From 6 April 2026, these changes will apply to Northern Ireland employees only.

New eligibility for miscarriage:

• Employees who experience a miscarriage, or who have a defined connection to a woman who has experienced a miscarriage, will now be entitled to Parental Bereavement Leave and Pay, ensuring support during this difficult time. 
• Like the existing arrangements for Parental Bereavement Leave and Pay, there will be no medical evidence requirements placed upon the employee.
• To be eligible for Statutory Parental Bereavement Pay, a bereaved employee will need to provide minimal evidence in the form of a written self-declaration that:
  • They meet any eligibility conditions for pay.
  • Confirmation of the name of the person claiming.
  • The date on which the miscarriage occurred, or was discovered to have occurred, by the woman who experienced it. 

Statutory Parental Bereavement Pay becomes a day one right:

• All cases of entitlement will qualify for Statutory Parental Bereavement Pay from the first day of employment, removing previous service and reliance on actual earnings. 
• Employees can rely on either their actual earnings or expected earnings based on reasonable assumptions, ensuring that no employee is left unsupported at a time when compassion and understanding are essential to their welfare. 
• Employers should be aware that:
  • Cases where entitlement was gained before 6 April 2026 will continue under the existing rules. 
  • The right to miscarriage entitlement is not retrospective and will not apply to miscarriages which occurred or were discovered before 6 April 2026.
  • All rights and entitlements currently available under Parental Bereavement Leave and Pay will be extended without exception to cases where eligibility arises due to miscarriage discovered on or after 6 April 2026.

Cars provided for private usage in the automotive sector

This will affect employers in the automotive sector who allow employees to use test cars for personal use.

Car and car component manufacturers often need to test cars under a range of different conditions. 

• 'Testing' means the car is being used by a test engineer in a documented research project by the car or component manufacturer.
  • The results must be monitored and written down for this to be classed as a research program.
• If the testing takes place during work hours and there is no private use involved, it will not be a taxable benefit. 
• If test engineers determine that the best way to test the car is during private journeys, then the primary reason for driving the car must be to conduct testing. Any private use must be clearly secondary. 
  • If these conditions are met, the use will not be treated as a taxable benefit.
  • If the cars are also used for personal reasons, then car and fuel benefit charges will apply. This could include taking the car home for the weekend or using it on a holiday. This applies whether the driver is a test engineer or any other type of employee.

For salespeople and service staff, a car can be a tool of the trade.

• HMRC has not introduced special arrangements for private use, with one small exception that applies when a salesperson takes the car home, for the purpose of:
  • Picking up a car from a customer.
  • Dropping off a car to a customer.
  • Arranging servicing for the car.
• In these circumstances, no car or fuel benefit tax is chargeable.

EIM23800 'Car benefit: special cases: employees in the motor industry' has further information on:

• Car benefit: special cases.
• Testing and experiments on cars.
• Demonstration and courtesy cars.

Transferring a business out of a company guidance publication

HMRC have published New guidance on transferring a business out of a company: disincorporation.

• The guidance sets out the tax implications you should consider when a company's business and assets are moved to its shareholders, who then operate as sole traders or a partnership. 

The guidance covers:

• Tax considerations for the company, including Corporation Tax, PAYE and VAT.
• Tax considerations for shareholders, including Income Tax, Capital Gains Tax and Stamp Duty. 

Voluntary NICs abroad

In Autumn Budget 2025, the government announced changes to voluntary NICs abroad. From April 2026 for tax years 2026-27 onwards, the option to pay voluntary Class 2 NICs for periods abroad will be removed. 

• New Class 3 NICs applications for periods abroad will require 10 years' continuous UK residency or NICs.

If you have workers abroad, inform them of the changes coming into effect from April 2026 and equip your workers with the knowledge they need to make informed decisions.

• The changes do not affect the ability of anyone to purchase voluntary NICs for tax years before 2026-27.

Further details and guidance will be published at a later date.

The changes are being made to ensure that individuals building a State Pension from outside of the UK have a sufficient link to the UK and are paying a fair price to do so.

• A wider review of voluntary NICs policy is planned to ensure the system is fair and fit for purpose. 

See Globally mobile employees: National Insurance

NICs relief for hiring veterans

At Autumn Budget 2025, the government announced the final extension of the employers' NICs relief for hiring qualifying veterans. 

• The relief will continue for two more years from April 2026 until April 2028.
• Employers will not pay employer NICs on earnings up to the veteran's upper secondary threshold of £50,270 for the first year of a veteran's civilian employment. 

See Employers' NICs relief for veterans

Operational activity following the publication of the government's response to the 2025 independent review of the loan charge

The final report of the independent loan charge review 2025, including the government's response, has been published.

• The government has accepted all but one of the recommendations, and in some areas, has gone further. 
• The government believes that what has been announced needs to be a decisive break with what has gone before.
• Legislation has been included in the Finance Bill to provide for a new settlement offer, which the government intends will maximise the opportunity for individuals to come forward and settle. 

For people who have yet to settle with HMRC, a new settlement opportunity will be introduced that will substantially reduce the amount that individuals have to pay, particularly those with the lowest liabilities and, typically, those on the lowest incomes.

• If they decide to settle, most individuals could see reductions of at least 50% in what they have to pay to settle their loan charge liabilities. 
• Depending on their individual circumstances, about 30% of those affected may be able to settle without having to pay anything. 
• The new settlement opportunity is open to anyone with outstanding loan charge liabilities, including employers. 

HMRC are working to deliver quickly on the new settlement opportunity, so that people with loan charge liabilities can finalise them and move on.

See Independent Loan Charge review government response

UK/India Double Contributions Convention

The UK and India have reached an agreement on Social Security contributions, known as NICs in the UK, for employees moving between the UK and India. 

• The agreement will come into effect by summer 2026. 

The UK already has similar agreements in place with countries including Canada, Japan, South Korea, Norway, Switzerland and the USA, as well as the 27 EU Member States. 

The Double Contributions Convention (DCC) ensures that employees moving between the UK and India will only have to pay Social Security contributions in one country at a time.

• Employees from one country who are sent to work temporarily in the other for up to three years will continue to pay contributions in their home country.
• The DCC also contains specific rules for mainers and aircrew.

Employers will need to help employees going to or coming from India, to check the terms of the DCC to determine where they will be liable to pay Social Security contributions. 

• The DCC will be published shortly.

Employees who will remain liable to UK NICs whilst working in India, or their employers, should apply to HMRC for a certificate of coverage. 

• These certificates confirm that an employee will continue to pay NICs in the UK and will not be liable to pay Social Security contributions in India.

See Globally mobile employees: National Insurance

Guidelines for Compliance: Help with Investment Zones: GfC15

HMRC have recently published new Guidelines for Compliance (GfC): Help with Investment Zones: GfC15.

Investment Zones are areas across the UK, where central and local government will work with business and local partners to create the conditions for investment and innovation.

• Businesses operating in Investment Zones can access a variety of incentives, including tax advantages.
  • These include reduced NICs, relief from Stamp Duty Land Tax and enhanced Capital Allowances for eligible investments. 

These guidelines are primarily for taxpayers who have business premises in an Investment Zone, or are considering doing business within one. 

• They will also be useful to Investment Zone governing bodies and professional bodies that advise clients on Investment Zones. 

They provide practical support by:

• Explaining the tax reliefs available within Investment Zones.
• Highlighting areas where HMRC are identifying errors.
• Encouraging compliance by clarifying areas of uncertainty.
• Helping taxpayers reduce the risk of incorrectly claiming tax reliefs.
• Advising on what records and evidence should be retained.
• Explaining what to do if a mistake is made. 

GfC are part of HMRC's ongoing commitment to publishing practical support for taxpayers.

• Guidelines are designed to complement existing HMRC guidance by clarifying HMRC's position in complex, widely misunderstood, or novel areas of the tax rules. 

See Investment Zones

Implementation of the Employment Rights Act 2025

The Employment Rights Bill became law in December 2025 and is now the Employment Rights Act 2025.

• Employers should prepare now for changes from February 2026 onwards.
• The government have launched new Guidance for businesses and workers, providing clear timelines and information about the changes.

The act will be delivered in phases to ensure that employees and employers have time to plan and prepare. 

Important changes from April 2026:

• Statutory Sick Pay: further details are available in the Statutory Sick Pay section of this guide.
• Paternity Leave and Unpaid Parental Leave: existing entitlements will be available from 'Day 1' of employment.  
• Launch of the Fair Work Agency: a new agency will be created to bring employment rights enforcement under one roof.

As part of HMRC's ongoing commitment to ensuring this act delivers for workers and businesses alike, HMRC are consulting on some of the act's details.

Statutory Sick Pay (SSP) changes: what employers need to know

From 6 April 2026, the Employment Rights Act 2025 introduces two major changes to SSP:

• Removal of the Lower Earnings Limit (LEL): all eligible employees will be entitled to SSP regardless of income.
  • SSP will be paid at 80% of normal weekly earnings or the uprated weekly flat rate of £123.25, whichever is lower. 
• Removal of the waiting period: SSP will be paid from the first full day of sickness absence, and not from day four. 

These changes will make SSP more accessible and remove barriers for lower-paid employees, and will apply across the UK, including Northern Ireland. 

• The relevant legislation will apply as to when the sickness absence took place.
• Absences starting before 6 April 2026 will follow the current system to determine eligibility and payment. 
• Absences starting on or after 6 April 2026 will use the new rules, unless otherwise outlined in legislation. 

HMRC has shared technical guidance, including on transitional protections, with software developers and payroll providers to help them prepare for these changes.

• Make sure your payroll systems are ready, and staff understand the rules.

Guidance on SSP for employers and employees will be updated in due course. 

See Statutory pay entitlement: directors and other employees

Protect your contractors from tax avoidance

If you have contractors working for you through umbrella companies, you can share HMRC's new 'Don't get caught out' campaign to help protect them from tax avoidance. 

Contractors can make informed and compliant choices by using HMRC's:

• Online guides to learn how to spot tax avoidance schemes.
• Interactive tools to check payslips and contracts to confirm the right amount of tax is being paid. 
• Real-life stories of people caught out by tax avoidance.
• An explainer YouTube video on how umbrella companies work and the risks to contractors.
• Signposts for how to get help and support to report or leave a scheme.

Contractors can also review HMRC's published named tax avoidance schemes and their promoters. 

• This is not an exhaustive list and HMRC never approves such schemes. 

Claim your tax refund in minutes

HMRC may have contacted you or your employees recently about a tax refund.

• For most PAYE taxpayers, HMRC no longer issue tax refunds automatically by cheque, but they now offer more ways for you to claim.

Encourage your employees to check the HMRC app and make sure they get what they are owed. 

The quickest and easiest way to claim your refund or to check if one is due is through the HMRC app. Here's how you can do it:

1. Open the HMRC app and navigate to the 'Pay As You Earn (PAYE)' section.
2. If you are due a refund, you will see a green 'Claim' button showing the amount owed.
3. Tap to claim and your refund will be paid directly into your bank account within one week.

If you are not signed up for HMRC's online services, you can still Claim your tax refund.

• You will need your P800 reference number from your tax calculation letter and your National Insurance number ready.

Tax code changes for winter payment recovery

Last year, the eligibility criteria for Winter Fuel Payments in England, Wales and Northern Ireland and the Pension Age Winter Heating Payment in Scotland were expanded so more pensioners would be eligible. 

• If an individual has a total income of over £35,000, HMRC will recover their winter payment through the tax system.
• A charge to Income Tax will apply that is equal to the full value of the payment received.
• The tax charge will apply in all parts of the UK.

From April 2026, HMRC will be automatically adjusting the tax code of any taxpayers who need to repay their winter payment through PAYE. 

• No further action is required, and they will receive a notification in early April 2026 to tell them that HMRC have changed their PAYE tax code.

In February 2026, taxpayers may receive a notification of their tax code for the 2026-27 tax year, which does not yet include adjustments for their winter payment.

• They do not need to take any action and should receive an updated tax code, which includes the recovery of their winter payment in early April 2026.

Your employees who file a Self Assessment return will need to include the 2025 winter payment on their 2025-26 tax return, due by 31 October 2026 if a paper return, or 31 January 2027 if filed online.

Employers and those operating pension schemes do not need to take any specific or different payroll actions.

• You will receive the information as part of the coding notices in early April 2026.

Taxpayers who expect their total individual income to be over £35,000 can choose to opt out of receiving future winter payments from April 2026.

See Winter Fuel Payment recovery, Scottish Winter Heating Payment recovery and How to check your PAYE Code

Administrative Burdens Advisory Board (ABAB) annual report 2025 now live

The ABAB is an independent body representing small businesses. 

• ABAB challenges HMRC on its performance, from a small business perspective, providing robust scrutiny against key initiatives, such as Making Tax Digital and improving the taxpayer experience.
• ABAB are passionate about listening to and understanding the needs of the small business community.
• Board members come from a range of businesses and professions, and their goal is to support HMRC to make the tax system quicker and simpler for small businesses.

The ABAB annual report 2025 marks a significant milestone in the board's ongoing commitment to supporting small businesses and improving the tax system.

• This publication showcases a year of dedicated engagement between ABAB and HMRC to gather insight and challenge HMRC, culminating in a comprehensive account of ABAB's impact and achievements. 

External link

February 2026 issue of the Employer Bulletin