UK government's spring 2025 tax update | Mandatory payrolling of benefits in kind delayed and NICs election simplifications
Published on 2nd May 2025
The government announced a package of policy proposals on 28 April to support its ambitions to simplify and modernise the UK tax system.
These include a delay to the introduction of mandatory payrolling of benefits in kind (which is to be introduced from April 2027 instead of April 2026) and other employee tax and incentives measures.
Mandatory payrolling of benefits in kind – delayed until 6 April 2027
The government has announced additional time for employers to prepare for the introduction of mandatory payrolling of benefits in kind.
Mandatory reporting and paying of income tax and Class 1A National Insurance contributions (NICs) on benefits in kind via payroll software will be introduced from April 2027 (rather than April 2026). The delay is in response to feedback from industry bodies and will give more time for software providers and employers to prepare for the change.
HMRC has published an updated technical note which provides more information on how employers can adapt to these changes in time for April 2027. The new reporting system will be mandatory for most benefits in kind and expenses from April 2027, and employers will also be able to payroll employment-related loans and accommodation on a voluntary basis from April 2027.
CEST – digital tool revisions
HMRC has revised its check employment status for tax (CEST) digital tool with effect from 30 April.
The CEST tool is used to find out if an individual (or a worker on a specific engagement) should be classed as employed or self-employed for tax purposes, and the changes are intended to make it easier to use.
Useful links have been included offering help on how to answer the revised questions. HMRC has indicated that it is committed to standing behind the outcomes of this tool where it has been used correctly – as ever, it is important that the information given to HMRC remains accurate.
NICs elections – simplification
From 1 May, the process for making a joint employer's NICs election has been simplified where the employer is using a new pre-approved election form template published on gov.uk. Previously, employers wishing to use the election had to submit the form to HMRC for pre-approval.
An NIC election is used to legally transfer to an employee the employer’s NICs obligation arising in connection with employment-related securities options and shares in certain circumstances.
Where a format different to HMRC's new template is being used, employers will still need to obtain approval from HMRC (which can take up to 30 days). Given the simplification announcement, it seems likely that HMRC's new pre-approved template will become the default NICs election used by the majority of companies.
It is important that the employer keeps copies of the completed and signed NICs elections, for their records and in case they are requested by HMRC.
Other tax changes ahead
The government has also published a summary of responses to a recent consultation on proposals to modernise the stamp taxes on shares framework.
Other measures announced include a consultation on draft legislation for the reform of the UK’s international tax rules (including proposed changes to UK tax legislation in transfer pricing, permanent establishment and diverted profits tax).
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