The Chancellor of the Exchequer, Rachel Reeves announced increases to the Minimum Wage rates on the eve of the Budget. The Chancellor confirmed that the government has accepted in full the proposals of the Low Pay Commission (LPC) for increasing minimum wage rates from 1 April 2026.

The National Living Wage (NLW) rate will increase from £12.21 to £12.71 on 1 April 2026 and represents an increase of 50p or 4.1%. The NLW is the minimum hourly rate that must be paid to those aged 21 or over. The increase represents a pay rise of £900 a year for someone working full-time and earning the NLW.

It was also announced that the National Minimum Wage (NMW) – for 18-20 year olds – will increase from £10.00 to £10.85 an hour. This is an 8.5% increase and will see younger workers having their pay boosted by up to £1,500 next year. This increase is part of moves to narrow the gap in wage rates for 18-20 years olds and the NLW and ultimately create a single adult wage rate for all those aged 18 and up.

The NMW rates for 16 to 17 years old will increase from £7.55 to £8.00 – an increase of 45p or 6% per hour – from next April. The Apprentice Rate will mirror this increase in line with earlier recommendations by the LPC.

At the Budget, the government also announced two new measures aimed at supporting young people’s employment and skills development.

1. The Youth Guarantee: Jobs Guarantee Scheme will provide a six-month paid work placement for eligible 18-21 year group, who have been on Universal Credit and searching for work for at least 18 months. This scheme will cover 100% of employment costs for 25 hours a week at the minimum wage, alongside other support measures.
2. The Youth Guarantee and Growth and Skills Levy will allocate more than £1.5 billion over the spending review period to improve employment and skills support. This funding will help ensure that young people have access to high-quality training opportunities and streamline the apprenticeship system to make it more efficient.

If you use your own money to buy items for work, you may be eligible to claim tax relief as long as the items are essential for your job and are used solely for work purposes.

Flat rate expenses (also known as a flat rate deduction) allows you to claim tax relief for a fixed amount each tax year to cover the costs of work clothing and tools required for your job. This tax relief reduces the amount of tax you owe. For example, if you claim a flat rate expense of £60 and pay tax at a 20% rate, you will pay £12 less in tax. When claiming a flat rate expense, there is no need to provide receipts.

A claim for flat rate expenses can be made on HMRC’s portal at www.tax.service.gov.uk/claim-tax-relief-expenses/what-claiming-for. You need to make your claim under the heading ‘Uniform, work clothing and tools (Flat rate expenses)’ in the portal mentioned above. If your employer pays towards your expenses, you must deduct the amount they pay to get the figure you can claim.

HMRC publishes a table entitled ‘Lists of industries and jobs’. The table lists the tax relief you can claim by category. For example, workers in the forestry sector can claim a flat rate expense of £100 and airline cabin crew £720. If your industry or job is not listed, you can claim a flat rate expense of £60 for each applicable tax year.

This tax relief is designed to support employees with essential job-related costs, so it’s worth checking if you are eligible to claim. There is also an option to claim the actual amount you have spent. You will need to provide receipts or proof of purchase if you use this method.

The Department for Business & Trade has recently published a report that outlines the government’s enforcement of the National Minimum Wage (NMW) and National Living Wage (NLW) for the 2024–25 financial year.

The Government is committed to ensuring that all workers receive the minimum wage to which they are entitled, and HMRC enforces this on its behalf through a strategy known as ‘Promote, Prevent and Respond’.

The ‘Promote’ strategy aims to address non-compliance due to lack of understanding rather than deliberate underpayment, focusing on improving information for employers so they can meet their legal obligations. If employers continue to neglect compliance, full enforcement actions are taken.

The ‘Prevent’ strategy targets employers who intentionally underpay workers, by highlighting the consequences of non-compliance to deter such behaviour.

The ‘Respond’ strategy comes into play when HMRC identifies non-compliance, either through worker complaints or its targeted enforcement activities. If an employer is found to have underpaid workers, HMRC issues a Notice of Underpayment (NoU), requiring the employer to repay the wages within 28 days and imposing penalties. Serious cases may result in a labour market enforcement undertaking (or order). In the most serious cases criminal prosecution can also be pursued by HMRC.

The budget for enforcement increased from £31.2 million in 2023-24 to £31.5 million in 2024-25, enabling HMRC to expand its compliance team and increase its investigative efforts to improve wage compliance and protect workers’ rights.

As a reminder, the current NMW and NLW rates took effect on 1 April 2025. The current hourly rate for the NLW is £12.21. For those aged 18 to 20, the NMW is £10.00 per hour. Workers aged 16 to 17 and apprentices are entitled to £7.55 per hour.

Employees who are working at home may be entitled to claim tax relief on certain work-related expenses. Where such costs are not reimbursed by the employer, either by direct payment or an allowance, employees can submit a claim for tax relief directly to HMRC.

Eligibility to claim tax relief applies when homeworking is a requirement of the role. This may be the case if an employee's job necessitates living at a distance from the office, or if the employer does not maintain a physical office. Tax relief is generally not available where homeworking is a personal choice, even if permitted under the terms of the employment contract or where the office is occasionally at capacity.

Employees may claim a flat-rate tax relief of £6 per week (or £26 per month for monthly-paid staff) to cover additional household costs incurred as a result of working from home, without the need to retain detailed expense records. The value of the relief depends on the individual’s highest marginal rate of tax, for example, a basic-rate taxpayer (20%) would receive £1.20 per week in tax relief (20% of £6). Alternatively, individuals may opt to claim the actual additional costs incurred, provided they can supply evidence to HMRC in support of the claim.

Backdated claims for up to four previous tax years are permitted.

Tax relief may also be available for the use of a personal vehicle be it a car, van, motorcycle or bicycle when used for business purposes. Relief is not available for ordinary commuting between home and a regular place of work. However, where travel is to a temporary workplace, or where the vehicle is used for other qualifying business journeys, tax relief may apply.

In addition, employees may claim tax relief on the cost of equipment purchased personally for work-related purposes, such as a laptop, office chair, or mobile phone, provided these are used exclusively or primarily for business use.

As of April 2025, more employers can claim the increased £10,500 Employment Allowance thanks to relaxed eligibility rules. This increase will help employers reduce some of the impact of the recent increases in employers' NIC.

The Employment Allowance allows eligible employers to reduce their National Insurance liability. The current allowance that applies from April 2025 is £10,500. Previously, the allowance was £5,000 per year. You can claim less than the maximum if this covers your total Class 1 NIC bill. 

A claim for the Employment Allowance is usually made when filing your Employer Payment Summary (EPS) as part of the Real Time Information (RTI) submissions to HMRC.

The previous eligibility restriction, which limited the allowance to businesses with less than £100,000 in annual employer NIC liabilities, was removed with effect from April 2025. This change means that more employers can now qualify for the allowance.

Connected employers or those with multiple PAYE schemes will have their contributions aggregated to assess eligibility for the allowance. The Employment Allowance can be used against employer Class 1 NICs liability. It cannot be used against Class 1A or Class 1B NICs liabilities. The allowance can only be claimed once across all employer’s PAYE schemes or connected companies. De minimis state aid rules may also apply in restricting the use of the allowance.

Employment Allowance claims need to be re-submitted each tax year. There are a number of excluded categories where employers cannot claim the employment allowance. This includes limited companies with a single director and no other employees, employees whose earnings are within IR35 ‘off-payroll working rules’ and someone you employ for personal, household or domestic work (unless they are a carer or support worker).