After the National Insurance shock of 2024, employers went into this Budget expecting a quieter ride. And that’s what they got.
Quiet doesn’t mean nothing to do, though. There’s a wage rise to plan for, new mileage rates, a big change to how employees claim expenses, and a new rule on how you pay HMRC.
Here’s what changes, when, and what it means for your payroll.
The changes at a glance
| Change | What’s new | From |
| National Living Wage (21+) | Up 3.9% to £13.21 an hour | April 2027 |
| 18 to 20 rate | Up 3.9% to £11.27 an hour | April 2027 |
| 16 and 17 and apprentice rate | Up 3.9% to £8.31 an hour | April 2027 |
| Mileage, over 10,000 miles | Up from 25p to 35p a mile | April 2027 |
| Mileage, first 10,000 miles | 55p a mile, now permanent | Already in place |
| EMI share options | Limit doubles from £60,000 to £120,000 | 6 April 2027 |
| Employment expenses | Claims over £2,500 move from Self Assessment to PAYE | 6 April 2028 |
| Paying HMRC | All PAYE and VAT paid by Direct Debit | April 2029 |
Minimum wage passes £13 an hour
The National Living Wage rises 3.9% to £13.21 an hour from April 2027. The 18 to 20 rate goes up by the same amount, to £11.27. Around 2.3 million workers will get a pay rise.
Rates for 16 to 17 year olds and apprentices haven’t been published yet.
The cost goes further than your lowest earners. People paid just above the minimum will expect their differential to hold, and overtime, holiday pay and pension contributions all rise with basic pay. If you budget for the headline rate alone, you’ll come up short.
Expenses and mileage
Mileage rates go up
If your people use their own cars for work, this one’s for you. The approved mileage rate for the first 10,000 business miles stays at 55p a mile, and that rate is now permanent. Above 10,000 miles, the rate jumps from 25p to 35p a mile from April 2027.
These are the maximum amounts you can pay tax-free and NIC-free. That’s good news for care workers, engineers and anyone else who covers big miles. Check your expenses policy and your payroll set-up before April.
Expenses claims move into PAYE
Right now, employees claiming more than £2,500 in employment expenses have to file a Self Assessment return. From 6 April 2028, that threshold goes. Employees will be able to claim tax relief on all their expenses through PAYE instead.
Fewer of your people will need to deal with a tax return, which is a win. How it’ll work in practice, and what it means for employers, is still to be published. The devil, as always, will be in the detail.
Paying HMRC and rewarding your people
Direct Debit becomes the rule
From April 2029, every business will have to pay its PAYE and VAT bills by Direct Debit. No more bank transfers, and no choosing the day.
That’s 2.5 years away, but it’s worth thinking about now. If you’re used to paying HMRC by transfer, you’ll want your cash flow ready for HMRC collecting on the due date, every time.
EMI share option limit doubles
Enterprise Management Incentives let employees hold share options with tax advantages. From 6 April 2027, the value of options each employee can hold doubles from £60,000 to £120,000.
For growing businesses, that makes share options a much stronger way to attract and keep key people, without the cost landing on payroll.
What stays the same
- Employer National Insurance stays at 15%, with no change to thresholds announced.
- Tax on wages doesn’t rise. The Chancellor ruled out increases to income tax on earnings.
- Student loans: interest on Plan 2 and Plan 3 loans is capped at 6%. Nothing changes in what you deduct through payroll.
For anyone running a business with retail, hospitality or leisure premises, there’s a bonus. Small Business Rate Relief for those sectors rises from £12,000 to £18,000, taking around 70,000 more businesses out of business rates altogether.
What to do now
- Budget for April 2027 pay. Model the 3.9% rise across your whole workforce, including differentials, overtime and pensions.
- Update your mileage policy. Make sure your expenses policy and payroll reflect the new 35p rate above 10,000 miles.
- Review your EMI scheme. If you offer share options, the higher limit could change what you can offer key people.
- Plan for Direct Debit. Check how you pay HMRC today and what the switch means for cash flow.
- Watch the detail on expenses. We’ll update you as soon as HMRC publishes how PAYE claims will work.
Budgets are announced in an afternoon, but the real work happens in the months after. At Ascend, our payroll pros are already working through the detail for our clients, so they’re ready well before April.
If you’d like your payroll handled by people who stay ahead of every change, talk to our team.
