Spring Statement 2026: Key Changes to Benefits, Payroll and Pensions

A series of measures announced in the Chancellor’s Spring Statement will significantly reshape how employers report benefits and manage employee remuneration over the next few years. From April 2027, businesses will be required to report benefits in kind through payroll software, while parallel adjustments to company car and van tax charges will steadily increase the cost of providing these perks. Looking further ahead, reforms to salary sacrifice arrangements from April 2029 are set to alter the National Insurance treatment of pension contributions, potentially increasing costs for both employers and employees. Taken together, these changes signal a clear direction of travel: greater administrative integration, rising tax burdens on workplace benefits, and a tightening of incentives around employee reward structures.

Mandating the reporting of benefits in kind via payroll software

The government has confirmed that the use of payroll software to report and pay tax on benefits in kind will become mandatory, in phases, from April 2027. This will apply to Income Tax and Class 1A NICs.

Company vehicles

The rates of tax for company cars are amended for 2026/27:

• the charge for zero emission cars rises from 3% to 4%
• the charge for other cars with emissions below 75g/km increases by 1%
• the maximum charge of 37% remains.

The government has confirmed increases to the benefit in kind rates for company cars for tax years up to and including 2029/30.

The government announced that it is introducing a temporary easement to mitigate the increasing benefit in kind tax liabilities of plug-in hybrid electric vehicle (PHEV) company cars due to new emission standards. The easement will apply retrospectively from 1 January 2025 to 5 April 2028. Transitional arrangements will apply to certain PHEVs until 5 April 2031.

Car fuel benefit charge

The government will increase the car fuel benefit charge from 6 April 2026 to £29,200.

Company vans

The government will increase the Van Benefit Charge and the Van Fuel Benefit Charges from 6 April 2026 to £4,170 and £798 respectively.  

Changes to salary sacrifice for pensions from April 2029

The government is changing how salary sacrifice for pension contributions works.

Salary sacrifice is when you agree to reduce your gross salary or sacrifice a bonus and, in return, your employer pays the same amount into your pension.

From April 2029, only the first £2,000 of employee pension contributions through salary sacrifice each year will be exempt from NICs. Contributions through salary sacrifice, like all pension contributions, will still be exempt from Income Tax (subject to the usual limits).

Employers and employees can still make contributions above £2,000 through salary sacrifice arrangements. However, employee contributions above this amount will be subject to employer and employee NICs like other employee workplace pension contributions.

Employers will need to report the total amount sacrificed through their existing payroll. All employer pension contributions will continue to be free of NICs.

Employees who choose to salary sacrifice to maintain eligibility for Tax Free Childcare or minimise the High Income Child Benefit Charge can keep doing so.

Comment

The changes to salary sacrifice lack detail but what is clear is that employers are likely to pick up another large National Insurance increase from 2029.

Those businesses are going to be able to quantify the financial effect now and, on top of rises in both the NMW and employers’ National Insurance, it will be interesting to see the effect on recruitment, etc. over the next few years.

Bear in mind that affected employees will also see a rise in their National Insurance contributions, which would appear to be an increase for ‘working people’. Rather strangely, the Income Tax reliefs available on pension contributions are retained in full for both employers and employees.

It is widely acknowledged that many employees do not save enough for their retirement. This change does not seem likely to encourage employers or employees to contribute more to pension pots.

Next steps

You can find more information about the recent Spring Statement here: Spring Statement Summary 

As always, these articles provide an overview of the various measures available, and no action should be taken without seeking professional advice.  At Ritchie Phillips, we pride ourselves on providing clear, pragmatic advice to help businesses, individuals and families. If you’d like to discuss any of the above, please get in touch.