Budget 2026: Key announcements for payroll professionals
At HR Connect, we are committed to continually monitoring legislative changes and industry developments that may impact our customers. The Autumn Budget included several announcements with implications for payroll, employee expenses and statutory payments. Here are some of the key developments payroll professionals should have on their radar.
Mileage rates
The Government has confirmed a higher tax-free mileage allowance for employees using their own vehicles for business travel.
The rate will be 55p per mile for the first 10,000 business miles, with the rate for mileage above this threshold increasing from 25p to 35p per mile.
For payroll teams, the changes will be important when reviewing mileage policies, expenses processes and the tax treatment of business travel payments.
National Living Wage and National Minimum Wage
New statutory minimum wage rates will take effect from 1 April 2027.
The National Living Wage for workers aged 21 and over will rise by 3.9%, from £12.71 to £13.21 per hour. GOV.UK has confirmed the following 2027 rates:
The accommodation offset will also increase by 3.9% to £11.53 per day.
Payroll teams should start planning ahead for the April implementation, including identifying affected employees and apprentices, reviewing pay rates and checking that payroll systems are ready for the change. Employers should also remember that deductions, working time and changes in an employee's age can all affect minimum wage compliance.
Employment expenses and Self Assessment
The Budget also sets out changes designed to simplify how employees claim tax relief on unreimbursed employment expenses.
From April 2028, the Government plans to remove the existing £2,500 Self Assessment threshold for employment expense claims.
This should allow more taxpayers to claim eligible employment expense relief through PAYE rather than having to complete a Self Assessment return solely to make a claim.
The Government has indicated that the new approach should make the process easier for taxpayers while ensuring claims are backed by appropriate evidence. Further details on how the new system will operate are expected ahead of the April 2028 implementation date.
Parental support extended to self-employed parents
Another significant announcement is the extension of parental support to self-employed fathers and parents in same-sex couples.
Eligible parents will be able to receive two weeks of financial support, currently worth up to £194 per week, extending support to groups that have previously fallen outside existing arrangements.
For payroll professionals, particularly those advising businesses and individuals as well as processing payroll, further guidance will be important in understanding eligibility and how the new entitlement interacts with existing statutory parental pay arrangements.
What should payroll teams do now?
While not all of these measures take effect immediately, payroll professionals should begin assessing the impact on their organisations and clients.
In particular, teams should prepare for the April 2027 minimum wage changes, review mileage and expenses arrangements and keep an eye out for further guidance on both employment expense claims and the extension of parental support.
Have a question?
If you have a question following yesterday's (28/10/2026) Budget Announcement and would like our expert support, please email info@hrconnect.org.uk and a member of the team will be happy to help.