Hello Everyone, The UK Government has confirmed significant changes to Her Majesty’s Revenue and Customs (HMRC) rules, set to take effect from 18 December 2025. These reforms are part of a broader push to modernise the tax system and improve compliance. Understanding these updates is crucial for individuals and businesses across the UK.
​This article will break down the confirmed changes, helping you prepare for the new requirements. The implementation date is fast approaching, so proactive awareness is key to avoiding penalties. We will focus on the most impactful adjustments for the average taxpayer and employer.
​Preparation is Key for Employers
​Employers in the UK face several new responsibilities, primarily concerning reporting and compliance within the PAYE (Pay As You Earn) system. These amendments aim to enhance the accuracy of Real Time Information (RTI) submissions. Accurate record-keeping has never been more vital for UK businesses.
​HMRC is stressing the importance of correct employee and company details on file. Incorrect data can lead to processing delays and administrative errors. It is a good opportunity for all businesses to conduct a thorough data audit before the deadline.
​Updates to Student Loan Deductions
​A significant operational change relates to the administration of student loan deductions. The system for identifying and deducting these loans is being streamlined to accommodate a new plan type. This directly impacts payroll departments and employees repaying student finance.
​Employers need to ensure their payroll software is updated to reflect the new options for loan types. This will ensure correct deductions are made from salaries from the implementation date. The change reflects the evolving structure of the student loan system in the UK.
- ​The introduction of a new Plan type 5 checkbox on the relevant forms (PDF and online).
- ​Employees using the online version will generally only be able to select one primary plan type (Plan 1, 2, 4, or 5).
- ​It will still be possible to select a Postgraduate Loan (PGL) alongside a primary plan type loan.
​Enhanced Focus on Expenses and Benefits
​HMRC is tightening its focus on how expenses and benefits in kind (BiKs) are reported and taxed. This is a crucial area for many employers who offer non-cash perks to their staff. The new rules stress clarity and accurate valuation of these benefits.
​Employers are encouraged to review the interim guidance published by HMRC to prepare for the upcoming changes. A key preparatory step is to compile a complete list of all benefits provided. This list should cover everything usually reported via the P11D form.
​This preparation will ensure a smooth transition to any new reporting requirements associated with BiKs. Staying ahead of these changes will minimise year-end compliance stress for the business. The new regime seeks greater transparency in this area.
​Managing PAYE Settlement Agreements (PSAs)
​For businesses that use a PAYE Settlement Agreement (PSA), HMRC is emphasising the need to keep details current. A PSA allows an employer to make a single annual payment to cover the tax and National Insurance on minor or irregular benefits.
​HMRC reports having noticed an increase in outdated or incorrect customer details related to PSAs. Ensuring your company’s name and address are correct on HMRC’s files is paramount. This simple administrative check can prevent major communication issues.
​Failure to update your information could result in important correspondence being delayed or sent incorrectly. It’s an essential housekeeping task that should be done immediately. Accuracy here supports efficient tax administration for all.
​Scrutiny on Salary Sacrifice Schemes
​HMRC is issuing warnings regarding certain third-party salary sacrifice schemes, particularly those involving grocery vouchers or similar benefits. Some providers are incorrectly claiming their schemes offer savings on employer National Insurance Contributions (NICs) with HMRC approval.
​It is vital for UK employers to understand that HMRC does not approve businesses to advertise their schemes as tax compliant. Employers must exercise due diligence and be cautious about any schemes making such claims.
- ​Always seek professional, independent advice before implementing any complex salary sacrifice arrangement.
- ​The responsibility for ensuring a scheme is tax-compliant ultimately rests with the employer.
​These schemes are under increased scrutiny, and employers should verify their legitimacy thoroughly. Relying on false claims could lead to significant tax liabilities and penalties down the line.
​Changes to Overpayment Refunds
​There is an important procedural change for individuals seeking a P800 tax overpayment refund. HMRC will no longer automatically issue a cheque after a 21-day period if the taxpayer has not claimed the refund online. The process is shifting towards a digital-first approach.
​Taxpayers who have not signed up for HMRC’s online services can still claim their P800 refund digitally. They will require their P800 reference number from their Tax Calculation letter and their National Insurance number.
​This change aims to speed up the process for those who embrace digital tools. It encourages more UK taxpayers to interact with HMRC via their online services and app. It represents a move toward greater efficiency in managing individual tax affairs.
​Preparing Payroll Software for RTI Updates
​To facilitate the upcoming rule changes, HMRC provided technical documentation to software developers in November 2025. This step is designed to help payroll software providers update their systems in time for the 18 December 2025 implementation.
​Employers should confirm with their payroll software vendor that their system will be fully compliant. The changes detailed relate to Real Time Information (RTI) submissions, which are a core part of the PAYE process. Seamless operation is dependent on updated software.
​A non-compliant system could result in incorrect payroll processing and potential penalties for the employer. Therefore, this check is a priority task in the coming weeks. Do not assume your software will update automatically without checking.
​Final Thoughts
​The confirmed HMRC rule changes starting on 18 December 2025 underscore the government’s commitment to a more accurate and digitally focused tax environment. For UK individuals and employers, the key message is preparation and due diligence. Employers need to verify software compliance, update their contact details, and carefully review the administration of student loans, expenses, and salary sacrifice schemes. Individuals should note the changes to the P800 refund process. By taking proactive steps now, UK taxpayers and businesses can ensure a smooth transition and remain compliant with the updated regulations.