Year End Tax Planning Guide: Employers (2025/26)

From April 2025, the eligibility rules for the Employment Allowance were widened, with the removal of the £100,000 employer Class 1 National Insurance threshold. As a result, significantly more employers are now entitled to claim this relief.

The Employment Allowance allows eligible employers to reduce their employer Class 1 National Insurance liability by up to £10,500 per tax year, delivering a direct saving on payroll costs.

Many employers continue to assume they are not eligible based on historic thresholds and therefore fail to claim the allowance. With payroll costs increasing across most sectors, this represents a genuine missed opportunity.

Employers should review their eligibility, particularly where payroll costs or headcount have grown in recent years. Where eligible, the allowance is claimed through payroll and can be applied during the tax year or retrospectively, subject to HMRC time limits.

Key dates and deadlines – 2025/26

• Claim can be made from 6 April 2025 through payroll
• Retrospective claims are generally possible for up to four prior tax years

Many employers provide benefits or reimburse expenses without fully considering the employment tax implications. Over time, this can result in under-reported benefits, incorrect tax treatment, and unexpected liabilities.

As part of year-end planning, employers should review all benefits and expenses provided during the year, including company cars, fuel, private medical insurance, subscriptions, loans, and any informal or ad hoc benefits.

There may also be opportunities to remove or restructure tax-inefficient benefits, take advantage of exemptions such as trivial benefits, or simplify reporting by moving benefits into payroll from the new tax year.

Key dates and deadlines – 2025/26

• Before 6 April 2026 – Deadline to register with HMRC to payroll benefits for 2026/27
• 6 July 2026 – Deadline to submit P11D and P11D(b) forms (for benefits not payrolled)
• 22 July 2026 – Deadline to pay Class 1A NIC (19 July if paying by cheque)

Termination payments remain an area of significant HMRC scrutiny. The correct distinction between taxable pay, post-employment notice pay, and tax-free elements is often misunderstood, particularly where contractual notice provisions are unclear or historic practices are followed.

Employers should review any leavers during the year to ensure termination payments have been taxed correctly and supported by appropriate documentation. This is especially important where settlement agreements are used, as HMRC can and does revisit historic terminations as part of wider employment tax reviews.

Early advice at the point of exit can significantly reduce the risk of retrospective PAYE and NIC liabilities.

National Minimum Wage compliance now extends far beyond basic hourly rates. HMRC increasingly reviews deductions, salary sacrifice arrangements, uniforms, training costs, and working time calculations.

Employers should consider whether any payroll practices could inadvertently reduce pay below minimum wage levels, particularly for lower-paid employees, those with variable hours, or where salary sacrifice arrangements are in place.

The consequences of non-compliance are severe, including financial penalties, back-dated arrears, and public naming.

Salary sacrifice continues to offer valuable tax and NIC savings when implemented correctly. Pension contributions, electric vehicles, and cycle-to-work schemes remain popular and effective.

However, arrangements must be properly documented, reflected accurately in payroll, and reviewed regularly to ensure they remain compliant and commercially appropriate. Year-end provides a natural opportunity to assess whether existing arrangements are still delivering value and whether new benefits should be introduced from the start of the next tax year.