The tax year-end is approaching. So stakeholders, including tax, payroll, HR, reward, pensions and finance, naturally start to think about employer year-end reporting. As well as deadlines, the tax year-end presents opportunities to take stock and plan for future strategy and legislative changes. In this article, we summarise key compliance obligations and deadlines for 2025/26, and signpost some key future changes to keep in mind as you plan for the year ahead – and beyond.
What do I need to think about for my 2025/26 compliance?
Some key actions and deadlines for 2025/26 employer year-end compliance are summarised below:
Date | Key action
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Perform payroll and Construction Industry Scheme reconciliations. Register with HMRC’s voluntary payrolling benefits and expenses online service for 2026/27 (note this is the last year for which benefits in kind can be payrolled on a voluntary basis – see below). Report where private use of a company car started, changed, or stopped between 6 January 2026 and 5 April 2026 on P46 (Car) if filing electronically (by 3 May 2026 if filing by post), and by 2 August, 2 November and 2 February for each subsequent quarter.
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Report details of Short Term Business Visitors covered by an EP Appendix 4 agreement. Report and pay PAYE due for Short Term Business Visitors covered by an EP Appendix 8 agreement.
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Report relevant post-termination benefits provided during 2025/26. Register any new share plans (or other reportable arrangements) and submit any required employment-related securities returns (including nil returns) for 2025/26 (where relevant noting changes to how net-settled share awards are reported). Notify HMRC of tax-advantaged Enterprise Management Incentive share options granted during 2025/26.
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Looking at the bigger picture
With the employment tax landscape constantly evolving and HMRC’s ability to apply more rigorous analytics on the data they collect across all taxes, organisations now face greater scrutiny.
Project Snowball, HMRC’s new audit-led programme applicable to businesses within the Large Business Directorate, focuses on how the organisations’ tax-related systems and processes operate across Employment Taxes, Corporation Tax, VAT, Customs and other relevant tax areas. This initiative will focus on systems, processes and controls - a shift by HMRC from the accuracy and completeness of returns. This means it’s critical to review how you collect and curate the data that underlies your employer returns, as well as the processes, controls and governance for utilising it accurately, both now and in the future as demands on your business change.
Another question to explore is whether you’re mining all the value in your workforce data – could your people strategy be enhanced using additional insights from your year-end reporting process? And are you making the best use of automation to reduce the costs associated with repetitive high-volume processes (such as preparing PSAs) and create more bandwidth for higher value activities?
This four-stage model could help shape an approach:
1. Prepare
- Identify reporting requirements and internal stakeholders responsible for your year-end filings;
- Plan your year-end, allocate roles and carry out training;
- Work with system providers to agree data collation and timeframes;
- Check and format data to facilitate analysis and to ensure completeness and accuracy; and
- Review analytics tools to ensure they reflect changes in legislation and consistently apply the rules to the data being analysed to support compliance.
2. Compare
Consider changes in the business and external landscape to contextualise changes in the data so that insights can be generated to identify opportunities for future improvement. Compare data against:
- Prior years to ensure completeness and to highlight trends;
- Budgets so that deviations to forecasts can be highlighted for investigation; and
- Policies to confirm compliance.
3. Report
- Complete mandatory returns and investigate any risks identified;
- Demonstrate value by reporting outcome against targets, e.g. Gender Pay Gap changes; and
- Connect and engage with employees through, for example, total reward statements.
4. Improve
- Evaluate opportunities for change, analyse data insights to identify cost saving opportunities;
- Review processes to reduce administration, manual intervention, duplication and compliance risk; and
- Identify, plan and deploy process changes to meet new reporting requirements.
What should I think about for the future?
Some important immediate and medium-term prospective changes could impact your employment tax, employee reward and payroll strategy and operations. It’s important to think about these now. Some key developments – not all of which will affect all employers – are summarised below:
Date | Prospective change and potential actions
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6 April 2026
| Umbrella companies – joint and several liability in respect of umbrella companies’ payroll withholding obligations for relevant payments made on or after this date may apply to recruitment agencies and, in certain circumstances, those recruitment agencies’ clients. Affected recruitment agencies and their clients should continue to review contractual arrangements for the supply of contingent labour, ensure their labour supply chain due diligence processes are robust, and monitor how their payroll governance and risk management processes perform under the new regime.
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6 April 2026
| Enterprise Management Incentive (EMI) share option plans – changes to allow more companies to operate an EMI plan for their employees come into effect. Companies that qualified to grant EMI options in the past but ceased to do so as the previous limits had been reached, or which didn’t qualify for EMI historically due to their size – but might do so now – should consider whether EMI options should form part of their total employee reward. Where EMI options have already been granted to employees, companies should consider whether it would be appropriate to extend the maximum period over which those options could be exercised from 10 to 15 years.
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7 April 2026
| Launch of the Fair Work Agency – the new agency will police employment rights previously enforced by the Gangmaster and Labour Abuse Authority, the Director of Labour Market Enforcement, the Employment Agency Standards Inspectorate, and HMRC’s National Minimum Wage Unit. Employers should continue to monitor and assess their systems and processes for complying with the relevant employment obligations.
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6 April 2027
| Payrolling benefits in kind becomes mandatory – income tax on benefits in kind other than living accommodation and employment-related loans must be reported through payroll. This is a significant change to employer reporting obligations that could require a significant lead in time, even if you voluntarily payroll benefits in kind now, as the new regime requires more information to be reported. It’s therefore important to prioritise assessing your capabilities to meet the requirements of the mandatory regime, identify complex cases, consider the impact on employees, prepare a robust implementation plan, and monitor HMRC’s evolving guidance.
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6 April 2029 | Pension salary sacrifice – pension contributions made under salary sacrifice (or other ‘optional remuneration’) arrangements will be subject to both employee’s and employer’s NIC (and, for larger employers, Apprenticeship Levy) to the extent they exceed £2,000 per annum. Points for employers to consider as they prepare for this change include modelling the impact on pension contributions costs across different employee groups, potential operational and payroll challenges, and employee communications.
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Additionally, HM Treasury has announced a review of Mileage Allowance Payment levels for those driving their own cars on business. The current rates have been in place since 2011, despite motoring costs rising significantly over the last 15 years. This review will be conducted before the next Budget so it is unlikely that there will be any imminent changes. However, any increase in rates will mean that:
- Employers will have to decide whether they will pay those increased rates for business mileage;
- Higher tax refunds for those who are paid the advisory fuel rates for business mileage. This is typically employees who are in receipt of a cash allowance; and
- Assuming there is also an increase for National Insurance Contributions (NIC) purposes, a further decrease in the level of cash allowance which is subject to NIC for many employees driving their own cars on business. As this saves NIC for both the employer and the employee, more organisations will want to look at this in more detail.
How KPMG can help
Our employment tax, payroll and employment law specialists have extensive experience working with employers to design, implement, and operate robust and efficient year-end reporting processes. Please contact Eloise Knapton, Caroline Laffey, Clare Tomlinson, Ash Majithia, Michael Wilson, Sarah Haynes, Justin Stokes, or your usual KPMG in the UK contact.