Budget 2026 maintains the headline rates of income tax on earnings and National Insurance Contributions (NICs). For 2027/28, the Class 1 Lower Earnings Limit will increase to £6,916 per annum (£133 per week), while other Income Tax and NIC thresholds remain frozen in line with previously announced policy.
From April 2027, the National Living Wage will increase by 3.9% to £13.21 per hour for workers aged 21 and over. The National Minimum Wage will increase to £11.27 for 18–20-year-olds and £8.31 for 16–17-year-olds and apprentices, with the accommodation offset increasing to £11.53 per day.
Beyond the immediate payroll cost, employers should consider potential impacts on pay differentials, salary sacrifice arrangements and wider National Minimum Wage compliance.
From 6 April 2027, the Company Share Option Plan (CSOP) will be rebranded as "EMI2", positioning it as the Government's intended follow-on scheme for businesses scaling beyond EMI.
The individual option limit will double from £60,000 to £120,000, the exercise period will increase to 15 years and the interaction with the EMI individual limit will be removed. An eligible employee could therefore potentially hold £250,000 of EMI options plus £120,000 of EMI2 options, subject to the separate conditions of each regime.
EMI will also be made more flexible, including a 180-day exercise window following certain disqualifying events and extended provision for companies arranging to transition to Employee Ownership Trust ownership.
Separate notification of EMI grants will also be replaced by reporting through the annual EMI return for grants made from 6 April 2027.
For certain Northern Ireland companies, the EMI changes may require separate consideration in light of existing limitations to existing EMI schemes.
The approved mileage allowance rate for employees using their own cars or vans for business travel is 55p per mile for the first 10,000 business miles, with the rate above 10,000 miles increasing from 25p to 35p from 6 April 2027.
The corresponding NIC treatment of Relevant Motoring Expenditure will also change. The Policy Costings recognise that employers may respond differently, with some increasing reimbursement rates and others retaining existing rates, potentially increasing employees' Mileage Allowance Relief claims.
From 6 April 2028, Benchmark Scale Rates for qualifying travel and subsistence will increase to £20 for travel exceeding five hours, £60 for over ten hours and £75 for over 24 hours. The existing 200-plus destination-specific Overseas Scale Rates will also be replaced by a simplified tiered approach.
Separately, the £2,500 Self-Assessment threshold for employment expense claims will be removed from April 2028. This may reduce compliance burden for taxpayers impacted.
Mandatory payrolling through Real Time Information will be phased. Company cars and vans, car and van fuel and medical benefits will be brought into mandatory payrolling from 6 April 2027.
Most remaining benefits will follow from 6 April 2028, although employment-related loans and employer-provided living accommodation will remain outside mandatory payrolling but can be payrolled voluntarily from April 2027, if the employer registers in advance.
Employers should use the additional implementation period to assess data flows between HR, reward, benefits providers and payroll and ensure that systems can support accurate real-time reporting.
Company car tax percentages for 2030/31 will increase by one percentage point across vehicle bands, subject to a maximum appropriate percentage of 40%. This continues the gradual increase in the taxation of company cars, including electric vehicles, and provides additional certainty for longer-term fleet and reward planning.
Budget 2026 presents a mixed picture for employers. The EMI2 and EMI changes are particularly welcome, strengthening the UK's tax-advantaged share plan offering and creating a more natural progression from EMI to EMI2 as businesses scale. This could give growing companies greater flexibility to use equity to attract and retain key talent.
Elsewhere, the direction of travel is increasingly towards real-time, data-driven employment tax compliance. Mandatory payrolling of benefits, changes to employment expense claims and evolving travel and subsistence rules will require employers to focus on the quality and integration of payroll, HR, expense and benefits data.
At the same time, higher minimum wage rates and potentially higher mileage reimbursement costs will increase workforce costs for some employers, while future company-car tax increases should be reflected in fleet and reward planning.
The key message is therefore one of preparation as well as opportunity. Employers should use the lead time to review benefit payrolling readiness, travel and expense policies and reward structures, while considering whether the EMI2 reforms and increased flexibility within EMI create new opportunities for employee equity participation.
The measures unveiled in the UK Autumn Budget will have far-reaching implications for businesses across Northern Ireland. If you have any enquiries, comments, or wish to explore further, we are here to assist.
Contact Eunan Ferguson and Emma McCrudden of our Tax team today.
