U.K. tax update targets payroll and employee admin changes

Exchequer Secretary Dan Tomlinson set out the U.K. government’s Tax Update 2026 in a written ministerial statement on 23 June 2026. It folds simplification, digital change and employee-tax administration into one package, and that combination will drive client questions about systems, reimbursement rules, payment timing and internal process design.

The digital push now reaches day-to-day payroll work

The update is built on HMRC’s Transformation Roadmap published on 21 July 2025. The roadmap aims to deliver a digital-first tax and customs system.

The roadmap includes a new online service for PAYE customers in 2025 to 2026 and a new expenses service that will let PAYE customers submit claims and upload supporting evidence in one place. For employers, that points directly to changes in how payroll and expenses teams gather records, route approvals and explain reimbursement rules to employees. It also means employment tax specialists will need to think about what data employers can already capture cleanly, what still lives in email chains or spreadsheets, and where policy wording will need tightening before the new services become part of normal practice.

Scale rates are moving from niche policy to client issue

One of the most immediate items in the update is the review of Benchmark Scale Rates and Overseas Scale Rates. Benchmark Scale Rates are the optional flat rates employers can use to reimburse employees for meals and other travel expenses in the U.K. without checking every receipt. Overseas Scale Rates do the same job for accommodation and meals when employees travel overseas, again without forcing a receipt-by-receipt review.

Scale rates sit at the intersection of expense policy, payroll controls and tax risk, especially for firms with mobile staff, project teams and frequent cross-border travel. HMRC’s overseas scale-rate manual covers a wide range of countries and regions, and after 5 April 2019 employers can use the closest listed city if a destination is not named. In practice, that means advisers may need to help clients decide whether existing travel policies still match current costs and whether their systems can point employees to the right rate without manual intervention.

The government will review BSR with current travel costs in mind and explore whether OSR can be simplified and aligned more closely with BSR. That opens the door to policy redesign work for payroll teams, employee communications for businesses with international travelers, and implementation questions for firms that want one cleaner reimbursement framework instead of separate domestic and overseas processes.

More timely tax payments will bleed into employee advice

The other change that will land on employer-facing teams is the consultation on more timely payments in Income Tax Self Assessment. The proposal would require PAYE taxpayers to pay more of their forecast Self Assessment liabilities in-year through PAYE from April 2029, while other Self Assessment taxpayers could face changes to Payments on Account.

It changes the rhythm of how people who already receive pay through payroll may see tax deducted over the year, and it creates a communication challenge for employers whose staff will want to understand why take-home pay or year-end bills may look different. It also creates a planning issue for advisers who support individuals with mixed income, side work or other taxable receipts that do not fit neatly into a standard monthly payroll cycle.

The Chartered Institute of Payroll Professionals lists the consultation as open until 4 August 2026, and the policy would spread payments into smaller, regular amounts and reduce unexpected bills. For KPMG, that makes the next few weeks a good time to map which clients will need employee guidance, which payroll systems might need configuration work, and which advisory teams should prepare examples that explain the shift in plain language.

PAYE Settlement Agreements and voluntary NICs are also in play

The update also includes a call for evidence on PAYE Settlement Agreements and a separate call for evidence on voluntary National Insurance contributions. The Chartered Institute of Payroll Professionals lists both as open until 15 September 2026.

PAYE Settlement Agreements are a familiar tool for employers, but they are also a frequent source of procedural friction because they sit between payroll, benefits and employment tax. The government is seeking evidence on where the current rules create unnecessary administration or uncertainty, which is exactly the kind of opening that generates work for employment tax advisers, payroll policy teams and systems specialists who maintain benefit reporting processes.

Voluntary National Insurance contributions are a different kind of file, but they can be equally important for employees and internationally mobile workers who are trying to protect benefit records or fill gaps in contribution histories. For KPMG teams, the practical issue is whether client advice needs to be refreshed now for HR, payroll and mobility contacts who will be asked to explain the rules long before any final change takes effect.

Where the workload lands inside KPMG

The package creates immediate demand across payroll operations, employment tax, global mobility, tax controversy and client communications. The new PAYE service and expenses service point to systems integration questions; the scale-rate review points to policy and process changes; and the Self Assessment proposals point to cash-flow planning and employee-facing guidance.

It also fits the broader direction of HMRC’s modernization push, where the goal is to move more activity online and get people and businesses to get tax and customs right first time. For KPMG, the most valuable support will be the kind that translates policy into workable controls: revised travel and expense rules, payroll process checks, employee education, and client-ready planning for the 2029 timing changes now moving into view.