Introduction
There have been a number of important employment tax developments across Ireland and the United Kingdom in 2026 to date. This combined update brings together the key changes and areas of focus for employers in both jurisdictions.
While many of the themes are consistent — including increased compliance scrutiny, rising employment costs and greater reliance on real-time data — there are also a number of jurisdiction-specific developments which employers should consider as part of their payroll, reward and mobility strategy.
Ireland employment tax update
Below is a summary of the key changes and areas requiring employer action.
Payroll tax changes for 2026
Several changes took effect from 1 January 2026 that impact payroll.
- The National Minimum Wage (workers aged 20 & over), increased to €14.15 per hour (from €13.50). Employers should ensure all pay rates are compliant, including for part-time, casual and seasonal workers.
- The 2% USC band increased to €28,700, ensuring full-time minimum wage workers remain outside the 3% rate.
- Income tax rates and bands broadly unchanged.
A further PRSI increase of 0.15% takes effect from 1 October 2026 as part of the Governments multi-year roadmap to support the Social Insurance fund and State pension.
Action: update payroll systems for the October 2026 PRSI rate change and factor the increased employer cost into budgeting.
ERR compliance- Revenue interventions have commenced
Revenue’s soft introduction period for Enhanced Reporting Requirements has ended and interventions are now underway, with Level 1 letters being issued where filings are incomplete or missing. Employers are expected to self-review and correct positions where necessary.
Action: review ERR submission history to ensure completeness and accuracy and address any gaps promptly.
BIK- company cars and vehicles
From 1 January 2026, updated BIK rules apply for employer-provided vehicles:
- A new Category A1 for zero-emission vehicles offers reduced BIK rates.
- The €10,000 temporary OMV reduction for cars in categories A1–D (including vans) continues for 2026, tapering to €5,000 in 2027 and €2,500 in 2028.
- An additional €20,000 OMV reduction applies to electric vehicles in 2026, giving a combined €30,000 total reduction.
- The highest mileage band threshold is retained at 48,001 km.
Action: review company vehicle policies and payroll treatment to ensure correct application.
SARP- key changes from 2026
SARP has been extended to 2030, with changes for new arrivals from 1 January 2026, including a higher minimum salary threshold (€125,000). Employer SARP return, is now due on 30 June.
Action: review inbound assignees and relief criteria and ensure employer compliance obligations met.
Pension auto-enrolment (AE)
Since MyFutureFund launched on 1 January 2026, some challenges have been encountered, particularly for employers with internationally mobile employees:
- AE can be triggered inadvertently when PRSI exemption documentation is delayed.
- PAYE Exclusion Orders: AE may be triggered unintentionally where a gross pay figure is reported for PRSI purposes.
- Incomplete NAERSA registrations are blocking AE submissions.
Action: ensure NAERSA registrations are fully complete and that payroll processes are aligned to avoid unintended AE enrolments, particularly for mobile employees.
EU social security rules
Agreement has been reached in EU negotiations on modernised social security coordination rules, with final approval expected later this year, and adoption potentially as early as October 2026. Key proposed changes include:
- Stricter posting and A1 requirements e.g. mandatory advance A1 applications (subject to limited exceptions and conditions).
- Three months' home country social security contributions required before a posting.
- Increased enforcement.
Action: review mobility and business travel processes to ensure they can accommodate the new requirements before they take effect.
Revenue focus areas
There is a continuing focus on payroll data accuracy, real-time reporting and audit readiness, and the following areas dominate:
- Staff entertainment: particularly when benefits are not available to all employees, and/or are considered frequent. Updated guidance has clarified the tax treatment of staff meals.
- Employment status: the recent compliance disclosure window for regularising worker misclassification errors closed on 30 January 2026, and we expect targeted queries and interventions to continue in this space.
- Expenses and benefits & salary sacrifice: always topical.
- Directors’ fees and remuneration: a heightened review of directors’ loans and expenses and payroll treatment thereon.
- Cross-border workers and short-term business travelers: monitoring remote working and cross-border working arrangements to ensure PAYE obligations met.
- Real-time reporting accuracy: employers must ensure that payroll submissions are filed on or before the pay date and that submissions fully reconcile to payroll records and actual payments. Discrepancies are easily identified by Revenue and can trigger queries or interventions.
- Insurable weeks and PRSI reporting: increased emphasis on the correct reporting of PRSI details, including insurable weeks, contribution classes and rates. Errors in this area can impact employee entitlements and may lead to retrospective corrections and liabilities.
- Alignment of payroll data with payments: growing focus on ensuring that amounts reported to Revenue match what is actually paid to employees. Any mismatch between payroll submissions, financial records and bank payments is a key audit trigger.
Action: review policies, procedures and payroll processes and records and ensure compliance with current guidance.
United Kingdom employment tax update
There have been few fundamental changes to headline PAYE and NIC mechanics, but there are several important practical and cost-related developments that employers should not overlook.
The main PAYE Income Tax thresholds remain broadly unchanged across the three income tax jurisdictions in the UK. The personal allowance remains at £12,570 for another year. The employee primary threshold for National Insurance remains aligned to £12,570, while the secondary threshold for employers remains £5,000 per year (£96 weekly / £417 monthly). The employer Class 1 NIC rate remains 15%, and Class 1A NIC on benefits also remains at 15%.
The freezing of PAYE and NIC thresholds means that fiscal drag continues. Even where the company is not introducing new pay awards, inflationary or retention-driven salary increases may push more employees into higher withholding bands, increasing employee tax leakage and potentially creating employee relations issues where staff perceive that “most of the increase is lost in tax”. This is especially relevant where pay reviews are being implemented alongside minimum wage uplifts.
Action: HMRC’s published materials continue to emphasise accurate payroll operation, maintenance of payroll records, and the expectation that employers make records available on request. In other words, while there is no major new enforcement initiative specifically attached to PAYE rates, HMRC is continuing its normal stance of record-keeping, data accuracy and RTI compliance.
The employer NIC rate remains at 15% with cost implications across remuneration structures.
Strictly speaking, the employer NIC rate itself did not change at the start of 2026/27 since it remains at 15%. The same 15% rate also applies to Class 1A NIC on taxable benefits and Class 1B NIC under PAYE Settlement Agreements
This remains one of the most significant cost pressures in UK employment tax. The company should view the 15% employer NIC rate not just as a payroll issue, but as a driver of wider people cost inflation.
Employers should be aware that the incoming April 2027 reform to payrolling benefits, detailed below, will have a material cash flow impact, because the NIC cost on benefits will move from an annual post-year-end payment cycle to an in-year remittance model.
Action: where the company is considering redesigning the reward mix, this increases the value of reviewing whether some elements can be delivered more tax-efficiently, while remaining compliant with minimum wage, optional remuneration and benefit valuation rules.
HMRC announced that for 2026/27, the approved mileage rate for cars and vans for the first 10,000 business miles increases from 45p to 55p per mile, with the 25p rate above 10,000 miles unchanged. The increase applies retrospectively from 6 April 2026.
For employers who reimburse business mileage in employee-owned cars or vans, this is a material policy and payroll change. The company now has a higher ceiling at which mileage can be reimbursed tax-free and NIC-free.
Action: employers need to review whether mileage reimbursement policies and systems have been updated to 55p / 25p and whether any backdated adjustments are needed.
For 2026/27, HMRC’s updated travel and employer-rate guidance confirms the following increases:
- Car fuel benefit multiplier: £29,200 for 2026/27, up from £28,200.
- Van benefit charge: £4,170, up from £4,020.
- Van fuel benefit charge: £798, up from £769.
Action: employers will need to reassess company car / van / fuel populations to quantify the increased tax and Class 1A NIC cost for 2026/27.
Statutory rates increased from April 2026, increasing labour costs and compliance risk. From 1 April 2026, the minimum wage rate increased to £12.71 for workers aged 21 and over.
Action: ensure pay structures remain compliant with minimum wage legislation.
The core future-facing change is HMRC’s move to mandatory real-time payrolling of benefits in kind, now to be introduced in a phased approach from 6 April 2027. HMRC has confirmed that phase 1 from April 2027 will cover:
- company cars
- car fuel
- vans
- van fuel, and
- employer-provided medical benefits
HMRC has also confirmed that most other benefits are expected to come into mandatory payrolling from April 2028, while employment-related loans and living accommodation will remain voluntary for now.
This is a fundamental process change. Historically, many employers have dealt with benefits after the tax year through P11Ds and P11D(b), with employee tax often collected later through code adjustments.
From April 2027, for mandated benefits, the company will need to:
- identify the taxable benefit value during the year
- feed that value into payroll each pay period
- deduct Income Tax in real time, and
- account for Class 1A NIC in real time rather than by annual return
There will also be a cash flow implication to this change. Employers that are used to paying Class 1A after the year end as part of the P11D(b) cycle will need to budget for in-year remittances once the new system goes live.
Action: this has major implications for governance. The company will need to review whether benefit data currently sits in payroll, HR, reward, finance or a third-party platform, and whether those systems can produce timely and accurate values. It also means payslips will change with employees seeing BIK tax reflected more immediately. This might lead to employee queries.
