In general, entertaining employees is an exception to the normal rule that business entertainment costs are not allowable for tax purposes. If an employer provides entertainment exclusively for employees and it is “wholly and exclusively for the purposes of the trade”, then the expenditure is allowable as a business deduction. Examples include a staff Christmas party, or a sporting event open only to employees.

It is important that the entertainment is not merely incidental to hospitality provided for customers. The definition of employees accepted by HMRC can extend to retired staff and the partners of existing and past employees.

Although the expenditure is allowable, the employees themselves may have to pay tax on the entertainment received and the employer will have to report this on form P11D. To counter this, many employers choose to include such items in a PAYE Settlement Agreement (PSA) and pay Income Tax and National Insurance contributions on behalf of the employees

Proper record keeping is important to be able to demonstrate where legitimate staff entertainment has taken place. Care should be taken to ensure that staff entertaining is reasonable, as excessive entertainment could lead to a tax charge for employees even if the employer’s costs have been disallowed (in whole or in part).

Setting up the correct tax code when a new employee starts is essential, as even small payroll errors can lead to unnecessary tax overpayments and avoidable complications later on.

When hiring a new employee, employers need to ensure the correct tax code and starter declaration are set up in their payroll system. Using the wrong tax code can cause the employee to overpay taxes, so accurate information is essential. Much of this information is provided on the employee’s P45, so it is important to remind new employees to bring it on their first day.

If the employee does not have a P45, they can complete HMRC’s online PAYE starter checklist. A paper version is also available if they cannot access the online tool. Employers must retain this information in their payroll records for the current tax year and the following three years. Once completed, HMRC’s online tools can be used to determine the correct tax code.

The starter checklist should be used in cases where the employee:

• Has a student or postgraduate loan
• Has personal details that differ from their P45
• Does not have a P45
• Is temporarily working in the UK for an overseas employer

Once completed, the checklist can be submitted to the employer by email, post, or in person. There is no need to send it to HMRC.

From 6 April 2026, significant changes to PAYE rules will affect umbrella companies, recruitment agencies, and end clients, increasing shared responsibility for payroll compliance across labour supply chains.

Umbrella companies are often used by freelancers, contractors, and temporary workers who prefer not to operate as limited companies or set up their own businesses. Essentially, an umbrella company acts as an intermediary between the worker and the end client (or recruitment agency), handling payroll, taxes and other administrative tasks on behalf of the worker. This includes any business supplying labour under a contract of employment.

There are significant changes to the PAYE rules for labour supply chains taking effect from 6 April 2026. Under the new rules, if an umbrella company fails to operate PAYE correctly or underpays tax and NICs, HMRC can recover the amounts due from the recruitment agency that has the contract with the end client, rather than pursuing only the umbrella company. Where there is no recruitment agency involved, the end client becomes responsible. This significantly widens the requirement for all parts of the labour supply chain to ensure that these umbrella companies are fully compliant with all payroll obligations.

Umbrella companies still remain the legal employer of the workers, but recruitment agencies and end clients will now share responsibility for ensuring PAYE is operated correctly from April 2026 onwards.

Providing the right information when you start a new job helps ensure your tax code is correct from the first pay day and avoids the risk of paying too much tax.

When starting a new job or taking on additional employment, your new employer will usually send your income details to HMRC, which are used to calculate your tax code. If this information is not provided in time, or you choose not to share it, you may be placed on a temporary emergency tax code.

To avoid this, you should provide your new employer with your P45. If you do not have a P45 or do not wish to supply it to your new employer then you should complete HMRC’s starter checklist.

You can check your employment details via HMRC’s online services or mobile app, ensuring only one employer is using the standard 1257L tax code and that your estimated income is accurate. This should be available to view within 6 weeks after your first pay day.

If your records are incorrect or incomplete, you can update your employer details, add or remove employers and amend your estimated income or benefit information directly with HMRC. These updates can help prevent underpayment or overpayment of tax.

These changes may or may not affect your tax code. If the changes result in a change, HMRC will notify your employer.

From 6 April 2026, new tax rules will expand workplace benefits relief. The changes will simplify the treatment of certain low-value workplace benefits-in-kind (BIKs), affecting both employers and employees.

The changes extend existing exemptions for eye tests, flu vaccinations and home working equipment to include reimbursements, aligning them with current provisions for direct supply.

Under current law, employers can provide these benefits tax-free, but reimbursements were excluded. The upcoming changes will ensure that reimbursed expenses for eye tests, flu vaccines and home office equipment are treated the same as where the employer provides the benefit directly for Income Tax and National Insurance purposes.

These changes aim to streamline the tax system, reduce administrative burdens and better reflect modern working practices. Employees will benefit by being able to claim reimbursements for minor work-related costs without tax or National Insurance implications.