Essential updates for employers: Winter 2025/26

In our Winter employer update, we cover the crucial updates affecting employers and employees in the UK. Whether you’re an experienced employer or just starting out, this guide will supply you with the knowledge and tools you need in the evolving world of UK employment. 

Salary sacrifice

Pensions – Autumn Budget Changes

A new £2,000 per year cap on the amount workers can contribute to their employment-based pension scheme under a salary sacrifice scheme free of National Insurance Contributions (NICs) applies from 6th April 2029. Salary-sacrificed pension contributions above the new £2,000 cap will be treated as ordinary employee pension contributions and therefore will be subject to both employers and employees’ NICs. Ordinary employer pension contributions will remain exempt from NICs.

As 2029 is a very distant date, further changes may occur and it is possible avoidance legislation will be introduced before this date. Either way, 2029 provides a window for employers and employees to adapt to this proposed change. 

To find out more details of the proposed changes please see here.

Apprenticeship funding changes

A new Youth Guarantee and amended Growth and Skills Levy have been announced following the Autumn Budget 2025, affecting employers who hire apprentices and also employers who pay the apprenticeship levy. The Growth and Skills Levy will replace the current apprenticeship levy and will allow employers to spend the funding on a wider range of training.

While details and timeframes have yet to be published by the Government, key points are set out as:

The Government defines SMEs as businesses with two out of three of the following:

Unfair dismissal

The Government has made an apparent U-turn on its plans surrounding unfair dismissal as part of its Employment Rights Bill. Currently, someone must have worked for their employer for two years before they are eligible to claim for unfair dismissal. It was anticipated that the Government would make this a day one right, but it is now expected that protection from unfair dismissal may become a right after six months of being in a job.

If you are concerned about these changes, ACAS provide more information here and if you require further legal help with any claims, your TaxAssist Accountant can refer you to specialist employment solicitors who would be able to help.

Eye test & flu vaccine/voucher reimbursement

Many employers offer eye tests and seasonal flu vaccines to their employees. Under current rules, these benefits can be exempt from income tax. Where the employer directly provides the benefit, there is no reporting requirement. The rules are proposed to be changed from April 2026 so that where the benefit is directly paid for by the employee and reimbursed by the employer, they will no longer need to report the reimbursement.

For employers who choose to reimburse employees for the cost of certain allowable low-value benefits-in-kind, such as eye tests and flu vaccines this is a welcome change and will reduce administrative burdens.

Christmas parties and gifts for staff

In the run up to Christmas, it is easy to overlook a number of valuable relaxations and tax reliefs which may apply to your business.

Making use of reliefs such as staff gifting and an annual hospitality event are a great way to say a seasonal thank you to your staff in a tax efficient way.

Tax relief on staff gifts

Special HMRC trivial benefits rules mean gifts which meet certain conditions are exempt from both income tax and NIC for employees and also employers.

The criteria for a gift to be treated as a trivial benefit are:

HMRC advises that where the cost of the gift (including VAT) is more than £50, the full value of the gift will be taxable under the normal benefit in kind rules.

It is also important to note that tax avoidance rules prevent a director of a close company receiving more than a total of £300 of trivial benefits in any tax year.

Tax relief on staff parties

Staff costs in relation to an annual event, for example a Christmas party, are allowable as a business expense. However, if you exceed certain limits, you could create a taxable benefit for your staff members. It is therefore important to stay within the permitted limits when planning your annual event.

Provided you spend no more than £150 per person, no tax charge will apply to the staff member.

If you go over the £150 limit, the full amount becomes taxable on the staff member and not just the excess over the £150 limit.

To be exempt from tax and reporting obligations, your Christmas party or similar annual event must meet the following criteria:

Where your business has several annual events, the combined cost of all the events and parties must be below the £150 per head limit to be exempt.

RTI Reporting at Christmas

If you choose to pay your employees early at Christmas, you should be aware of a special easement to your PAYE reporting obligations, to avoid problems for those who make Universal Credit claims.

HMRC has a permanent easement in place specifically to allow employers to pay employees early at Christmas. Employers can report their normal (or contractual) payday as the payment date on Full Payment Submission (FPS). This ensures you protect your employees' benefits positions. Employers must make sure that the FPS is submitted on or before the normal payment date. Reporting the one-off early payday as the payment date can impact current and future benefit entitlements. 

For example, if you pay employees on 19th December 2025 instead of 31st December 2025, you will report the payment date as 31st December 2025, and your FPS must be sent to HMRC on or before 31st December 2025. 

This is only an easement of the rules for the Christmas period, and the normal Real Time Information (RTI) rules still apply at all other times of the year. 

 

How TaxAssist Accountants can help    

This guide has helpful information about payroll changes. Remember, TaxAssist Accountants has a team that can help with all your payroll needs. Contact us today on 01494 778900 or use our online contact form. 

 

Last updated: 9th December 2025