Saffery Autumn Budget 2026 For Employers

The Budget includes several significant changes for employers, including a substantial expansion of tax-advantaged employee share options, simplification of EMI reporting, changes to the taxation of image rights and increased approved mileage rates.

Alongside changes to company-car taxation, electric vehicle costs and the introduction of mandatory payrolling of benefits in kind, employers should consider both the opportunities created by the new measures and the changes required to existing payroll, reward and benefit arrangements.

You can read the detail behind each of the key announcements below.

Enterprise Management Incentives

The UK has two tax advantaged share option schemes – the very popular Enterprise Management Incentive (EMI) scheme and much less popular Company Share Option Plan (CSOP).

Where available EMI options are generally the preferred choice, as CSOP schemes are subject to more restrictive rules particularly around qualifying shares and scheme documentation. Although these restrictions have been relaxed over time, EMI remains much more widely used than CSOP.

One of the potential drawbacks to CSOP is the relatively low limit on the value of shares that can be awarded.

As announced in the 2026 Budget, from 28 October 2026 CSOP arrangements will be rebranded as EMI2. From 6 April 2027, the individual EMI2 option limit will double from £60,000 to £120,000 and the maximum period for exercising options while retaining the tax advantages will increase from 10 years to 15 years.

A particularly important change is the removal of the existing interaction between EMI and EMI2 from 6 April 2027. This will allow the two schemes to operate independently, meaning companies will be able to use EMI and EMI2 alongside one another. HMRC’s guidance expressly confirms that EMI2 may be used alongside EMI, after a company has grown beyond the EMI eligibility limits or where the activities undertaken by the business mean it does not qualify for EMI.

Key Takeaway

EMI schemes will likely still be the preferred scheme as it will retain access to Business Asset Disposal Relief, which is rarely available under CSOP (newly EMI2). Nevertheless the EMI legislation does contain eligibility criteria not present in EMI2 and so in certain circumstances EMI2 may prove the most tax efficient method of rewarding staff with equity. These changes significantly increase the relevance of EMI2 as both an alternative and a complement to EMI. Companies that have previously dismissed tax-advantaged options because they were too large for EMI, undertook an excluded activity or the staff member in question did not qualify, should revisit their share-plan arrangements.

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EMI Grant Notifications

For EMI options granted on or after 6 April 2027, companies will no longer be required to make a separate notification to HMRC following the grant. Instead, the grant information will be reported through the general EMI scheme end-of-year return.

This removes an important compliance risk for employers. Under the current rules applying to options granted on or after 6 April 2024, an EMI grant must be notified to HMRC by 6 July following the end of the tax year in which the option is granted. Failure to meet the notification requirement could put the availability of the EMI tax advantages at risk.

It is not yet clear whether a late EMI notification which would normally invalidate the tax advantages of the option will be extended to the general EMI return. If so, then a late EMI return will have serious consequences for the individual concerned.

Key Takeaway

This is a welcome simplification for employers. Missing what may appear to be an administrative filing deadline could have significant consequences for the company and affected option holders.

Including grant information in the annual return should reduce the risk of employers inadvertently missing a separate notification requirement. Companies will still need to maintain complete and accurate records of grants, valuations and supporting documentation so that the required information can be included in the annual return.

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Image Rights

As announced at Budget 2025, payments for image rights connected with an employment will be treated as employment income. The Chancellor has now confirmed that the measure will take effect from 6 April 2028, one year later than previously announced.

The change is particularly relevant to sectors such as professional sport and entertainment, where separate arrangements may be entered into for the commercial use of an individual’s name, likeness, appearances and other associated rights.

Key Takeaway Where the new rules apply, the payment will be taxed as employment income. The measure could therefore materially increase the income tax and National Insurance cost of image rights arrangements connected with an individual’s employment.

Businesses using such arrangements should identify the relevant contracts and payment flows and assess which payments could fall within the new rules. This will be particularly important where payments are currently made separately from remuneration, including where payments are made under an image rights agreement or to another entity.

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Mandatory Payrolling Of Benefits In Kind

The Chancellor confirmed that legislation will be brought in to provide a phased introduction to the mandatory payrolling of benefits in kind. Company cars, vans, fuel and medical benefits will be brought within mandatory payrolling from 6 April 2027. Most remaining benefits in kind and taxable expenses will follow from 6 April 2028.

Beneficial loans and living accommodation will remain outside mandatory payrolling and will continue to be reported separately.

Key Takeaway

Employers should use the additional time before the phased introduction to review their benefits data and test the flow of information between HR, benefits providers, fleet teams and payroll.

Cars, fuel and medical benefits can involve changes during the tax year, so employers will need reliable processes for capturing information, processing adjustments and reporting the correct taxable value through payroll.

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Company Car Tax Rates

The government will introduce legislation to set company car tax rates for the tax year 2030-31. Appropriate percentage for zero-emission company cars will increase by 1% in this tax year. The percentages applying to all other company-car bands will also increase by 1%, subject to the maximum appropriate percentage of 40%.

Key Takeaway

Although the change does not take effect until April 2030, the confirmed rates give employers greater certainty when modelling longer-term fleet and electric-vehicle arrangements.

Employers operating company car or salary sacrifice arrangements should incorporate the future rates when assessing employee income tax and Employer Class 1A National Insurance costs.

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Electric Vehicle Excise Duty (eVED)

A further consideration for employers operating electric car arrangements is Electric Vehicle Excise Duty, or eVED.

From 1 April 2028, the mileage-based charge will apply to battery-electric, plug-in hybrid and hydrogen fuel-cell cars. The initial charge will be:

• 3p per mile for battery-electric and hydrogen fuel-cell cars, and
  

• 1.5p per mile for plug-in hybrid cars.

The rates will subsequently be uprated in line with CPI.

Key Takeaway

Employers operating company car and EV salary-sacrifice schemes should review their scheme rules to establish who will bear the eVED cost from April 2028.

The mileage-based charge will represent an additional running cost for electric and plug-in hybrid vehicles. Employers should reflect this in future scheme-cost projections and ensure that the position is explained clearly to participating employees.

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Approved Mileage Allowance Payments

The Chancellor announced an increase to the tax-free and tax-deductible mileage rates applying where employees use their own cars and vans for qualifying business journeys.

The rate for business mileage above 10,000 miles will increase from 25p to 35p per mile from 6 April 2027. The approved rate for the first 10,000 business miles increased from 45p to 55p per mile from 6 April 2026.

Key Takeaway

Employers should review their mileage reimbursement policies and decide whether to adopt the increased approved rates.

Employers are not required to reimburse employees at the statutory approved rate. Where an employer reimburses at a lower rate, employees may be entitled to claim tax relief on the qualifying shortfall.

Expense systems and employee communications should be updated to reflect the applicable rates and implementation dates.