Most employees won't see a headline change to their tax rates. Income tax and National Insurance rates and thresholds stay frozen. But Budget 2026 changes how benefits are taxed, what expenses you can be paid tax-free, and several things that matter to families.
Quick answer
- Company cars, vans, fuel and medical insurance taxed through payroll from April 2027. Most other benefits from April 2028.
- Mileage above 10,000 business miles: 25p → 35p (April 2027). First 10,000 miles stay at 55p.
- Subsistence scale rates rise to £20 / £60 / £75 (April 2028).
- National Living Wage £13.21 (April 2027).
- Child Benefit £28.00 / £18.55 a week (2027/28). HICBC overpayments can be offset.
- Employee expense claims: the £2,500 Self Assessment threshold is removed (April 2028).
- Frozen: personal allowance £12,570, higher-rate threshold £50,270, NI rates.
1. Benefits in kind move into payroll
Today, most taxable perks are reported on a P11D after the tax year, and the tax is collected later through your tax code. That often causes surprise code changes.
| From | Benefits that must go through payroll |
|---|---|
| April 2027 | Company cars, vans, car and van fuel, medical insurance |
| April 2028 | Most other benefits (e.g. gym, other perks) |
| Excluded | Employer-provided loans and accommodation |
What it means for you: tax on your company car or private medical insurance will be deducted from each payslip from April 2027, spreading the cost evenly with fewer tax code surprises. Your payslip will show the benefit.
Company car tax rates are already set to rise. Electric cars go to 5% (2027/28), 7% (2028/29), 9% (2029/30) and now 10% in 2030/31, with all bands up 1 point that year. See our electric company car guide.
2027/28 fuel and van charges: car fuel benefit multiplier £30,200, van benefit £4,310, van fuel benefit £825.
2. Mileage and travel expenses
Mileage (from 6 April 2027)
| Business miles in the tax year | 2026/27 | 2027/28 |
|---|---|---|
| First 10,000 | 55p | 55p |
| Over 10,000 | 25p | 35p |
The government describes this as a permanent increase for those who rely on their own vehicle for work. It also applies to the NI exemption. If your employer pays less, you can claim the difference as tax relief.
Subsistence scale rates (from 6 April 2028)
The benchmark scale rates employers can pay without checking receipts are being modernised:
| Travel time | Current (to April 2028) | New (from April 2028) |
|---|---|---|
| Over 5 hours | £5 | £20 |
| Over 10 hours | £10 | £60 |
| 15+ hours and ongoing past 8pm | £25 | replaced by the new bands |
| Over 24 hours | n/a | £75 |
Overseas scale rates will be simplified from 200+ country rates into a tiered system linked to the new UK rates.
Claiming unreimbursed expenses
From April 2028, the £2,500 limit that forces you into Self Assessment to claim employment expenses is removed, so more people can claim through PAYE. Expect more evidence checks before relief is given.
Note: the £6-a-week working-from-home relief you could claim directly from HMRC ended in April 2026. Only employer-paid homeworking allowances remain.
3. Pay
- National Living Wage: £13.21 an hour from 1 April 2027 (+3.9%), worth around £910 a year for a full-time worker. The National Minimum Wage rates for younger workers rise too.
- Parental pay is being expanded, including to self-employed fathers and partners. Details to follow.
- Sponsored workers: if your employer pays the Immigration Skills Charge or certificate of sponsorship fee, it won't be taxed as a benefit for you.
4. Families
Child Benefit (2027/28)
| Per week | |
|---|---|
| Eldest or only child | £28.00 |
| Each other child | £18.55 |
High Income Child Benefit Charge (HICBC)
The HICBC applies when the higher earner has income over £60,000, tapering away fully at £80,000. Budget 2026 fixes a long-standing unfairness: if Child Benefit was overpaid and someone also paid HICBC on that same overpayment, HMRC can now offset one against the other. The change is backdated to January 2013. If this has happened to you, contact HMRC or wait to be notified.
Student loans
- Plan 2 and Plan 3 interest is capped at 6% from 1 September 2026 to 31 August 2027.
- The Plan 2 repayment threshold is frozen (as previously announced).
Help with energy bills
- £100 Household Energy Payment from January 2027, paid directly to households in council tax bands A–D in England (the devolved governments get equivalent funding).
- 0% VAT on household electricity in Great Britain extended to 30 June 2027.
What employees should do
- Company car or private medical insurance? Expect it on your payslip from April 2027
- High business mileage? Make sure your employer pays 35p above 10,000 miles from April 2027
- Paid HICBC and had a Child Benefit overpayment? Ask HMRC about the offset
- Check your 2027/28 tax code when it arrives
ProKeeper's view
For employees with a company car, the payroll change mostly means no more surprise tax-code adjustments: the tax spreads evenly across your payslips. If you run payroll for your own company and provide cars or medical cover, talk to your payroll provider now, because April 2027 software and process changes are needed.
— Riya Simariya, Director, ProKeeper Limited
Part of our series: Budget 2026: what it means for you
Related: Side hustles & self-employed · Homeowners, buyers & drivers · Business mileage guide · Payroll services
Employer providing benefits? We can get your payroll ready for April 2027. Book a free consultation.
Official sources
- Changes to reporting of benefits in kind from April 2027
- Company car tax rates for 2030 to 2032
- Child Benefit overpayments and the HICBC
- Immigration skills charge and certificate of sponsorship fees
- OOTLAR (sections 2.1, 2.6–2.9)
- OOTLAR Annex A: rates and allowances
- Budget 2026 document
Checked against the Budget 2026 documents published by HM Treasury and HMRC on 28–29 October 2026. General information, not personal advice. Most measures still need to pass through Finance Bill 2026-27.