Essential updates for employers: Summer 2026

Changes to holiday pay record keeping requirements 

From 6th April 2026, the rules surrounding holiday pay record keeping have changed. Employers are now required to retain detailed records on all workers holiday leave and holiday pay for at least six years, to prove compliance with the Employment Rights Act 2025. 

Records that employers must retain include: 

• holiday entitlement 
• holiday leave taken 
• leave carried forward from previous years 
• payments in lieu of untaken leave for those leaving employment 
• holiday pay calculations 

Many employers may already be doing some or all of the required record keeping, but the emphasis is now on ensuring all employers are keeping full and comprehensive records of all aspects surrounding employees pay and leave. 

It is important that employers comply with these changes, as it is now a criminal offence enforceable by the Fair Work Agency, leading to penalties and demands for any underpayments to workers. 

Payrolling Benefits in Kind (BIKs) – now being phased in    

HMRC has announced yet another change to the roll out of mandatory payrolling of (BIKs). Payrolling of BIKs will be made mandatory in phases for employers, with a certain number of benefits being made mandatory in Phase 1, while others are now to be delayed until Phase 2. 

What is included within Phase 1? 

• company cars 
• car fuel 
• vans 
• van fuel 
• employer-provided medical benefits  

Phase 1 is expected to come into force from 6th April 2027 as planned. 

Phase 2 is now planned for 6th April 2028 and is expected to mandate all other benefits, except for loans and accommodation, which are still set to remain voluntary to payroll. 

What does this mean for employers? 

Employers should now consider whether they will payroll only those mandatory benefits from the next tax year and continue to include the remaining benefits on form P11D, or choose to payroll all benefits before they become mandatory. 

 

The new Fair Work Agency 

The Government launched the Fair Work Agency (FWA) on 7th April 2026, a new enforceable body for employment rights, as part of the Government’s continuing plan to ‘Make Work Pay’ across the UK. 

Their remit includes regulations surrounding: 

• National Minimum Wage 
• Agency worker protections 
• Gangmaster licencing 
• Holiday pay 

The FWA has the power to inspect workplaces and demand employers provide evidence of compliance with employment law.  

Employers found not to be complying with the appropriate laws can be liable to face financial penalties, employment tribunals and criminal proceedings. 

Low Earner’s Pension Payment 

HMRC is addressing a historic issue surrounding low earners who are not receiving tax relief which they are entitled to due to the type of pension scheme they are enrolled in.  

Employees who are enrolled into a net pay arrangement (NPA) pension scheme, but do not earn enough to pay tax, may have missed out on tax relief on their pension contributions for several years. 

NPA pensions work by providing employee tax relief via the employee’s payslip, reducing the amount of tax the employee pays each period (typically by 20% of the value of the pension contribution).  

However, where a low earner has no tax to pay, they miss out as there is no tax for the relief to be offset against. Therefore, many low earners will have missed out on tax relief that others have received, simply because of the pension scheme their employer has chosen. 

HMRC is seeking to rectify the situation by making payments to affected individuals. There is no requirement for employers to make changes to payroll or intervene in the situation. It will be dealt with between the employee and HMRC, either by letter or personal tax account online in August 2026. Employees may have questions about this, so employers should be aware of the impending payment. 

Right to Work Checks extended to self-employed workers from October 2026 

From 1st October 2026, Right to Work requirements will be extended to cover certain self-employed and subcontracted workers, with the construction industry identified as one of the sectors likely to be most affected. Businesses engaging self-employed individuals may need to conduct compliant Right to Work checks and retain evidence of those checks. Draft guidance is found here. 

Failure to comply could result in significant penalties, making it important for businesses to review their onboarding and engagement procedures ahead of the October implementation date.  

For businesses that rely on self-employed workers, now may be a suitable time to seek professional advice to understand how these changes could affect their compliance obligations. 

Employing teenagers for summer jobs 

During the summer, many employers in seasonal trades employ teenagers for weekends and school holidays. Though arrangements are often casual, employers should still be aware of important rules when hiring this type of employee. Children can work part time from age 13 or 14, depending on your local authority rules. 

National Minimum Wage (NMW) applies when an employee reaches ‘school leaving age’. In England and Wales this is defined as ‘after the last Friday in June of the school year in which their 16th birthday falls’. Once an employee reaches this age, their NMW rate of pay is £8 per hour (2026/27). 

National Insurance Contributions (NICs) are deducted from employees over the age of 16, where earnings surpass £1,048 per month or £242 per week. However, no employers’ NICs is payable until they reach age 21 unless the employee earns £4,189 a month or £967 a week. 

Income Tax is payable in the same way as adults – children also receive a personal allowance of £12,570 per year (2026/27). However, under 16s do not need to be added onto the payroll unless their total income is over their personal allowance. 

There are also restrictions on how many hours children can work, and the types of work they can do. For example, they can work no more than four hours without a one-hour break and cannot work before 7am or after 7pm.  

Employers should be aware of the restrictions that affect any young employees that they hire. 

Pay transparency rules in future? 

Following the EU Pay Transparency Directive, the Government is consulting on whether to bring in similar rules in England, Wales and Scotland. The Northern Ireland Executive has not yet announced what it plans to do.  

The proposed new rules would make it mandatory to display salary details in job adverts or prior to candidates starting a role.  

Need some help? 

TaxAssist Accountants can introduce you to specialist employment law support service. To find out more, contact us on 0800 0523 555  or complete our online enquiry form and we'll be in touch. 

 

Last updated 22 Jul 2026 | First published 12 Aug 2025

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This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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