Benefit in kind changes arrived quietly in the Budget, but they carry real consequences for employers and employees. These changes affect company cars, reimbursed expenses, and homeworking support. Some measures ease pressure. Others quietly remove reliefs people had come to rely on.
This article explains what changed, who benefits, who loses, and what employers should do next.
What Benefit in Kind Changes Mean for Employers
Benefit in kind rules tax non-cash rewards provided to employees. These rewards include company cars, paid expenses, and support for working from home. When these rules change, tax costs change too, and payroll processes must follow.
Employers who miss the detail often discover problems later. That usually means corrections, penalties, or uncomfortable conversations with staff. This Budget introduced both helpful reliefs and unwelcome removals, and both require attention.
Winner One – Easement for Plug-In Hybrid Electric Vehicles
Company car tax depends mainly on a car’s list price and its CO₂ emissions. As emissions rise, the benefit in kind charge usually rises with them. From 1 January 2025, new EU and United Nations emissions standards applied. These standards increased reported emissions for many plug-in hybrid vehicles.
Under normal rules, that increase would have pushed tax bills higher. Instead, the government introduced a temporary easement to soften the impact.
How the Plug-In Hybrid Easement Applies
For a limited period, HMRC will ignore the higher emissions figure for qualifying vehicles. It will instead use a nominal CO₂ figure of 1g/km. Where emissions fall between 1g/km and 50g/km, the vehicle’s electric range still determines the tax percentage.
This approach keeps benefit in kind charges lower than expected, but only for vehicles that meet strict conditions.
Conditions That Must Apply
The easement applies only where every condition is satisfied. Missing even one condition removes the relief entirely.
Eligibility Conditions for the PHEV Easement
The vehicle must have been registered on or after 1 January 2025. Its official CO₂ emissions figure must be 51g/km or higher. The registration must not use Euro 6d-ISC-FCM or Euro 6e standards. The vehicle must also have an electric-only range of at least one mile.
How Long the Easement Lasts
The easement applies retrospectively from 1 January 2025. Employees who receive a qualifying car before 6 April 2028 benefit for the longest period. The relief ends when the arrangement changes or renews, or no later than 5 April 2031.
This measure helps in the short term. It does not remove the need for longer-term company car planning.
Winner Two – Expansion of Workplace Benefits Relief
Current rules restrict tax-free reimbursements. In most cases, employees must qualify for a personal tax deduction before an employer can reimburse costs tax-free. That restriction blocks many practical and sensible payments.
From 6 April 2026, that position changes.
What Changes from 6 April 2026
Employers will be able to reimburse certain costs tax-free without checking whether the employee qualifies for a deduction. This change removes unnecessary administration and supports employee wellbeing.
Costs Employers Can Reimburse Tax-Free
Employers will be able to reimburse eye tests, flu vaccinations, and homeworking equipment without triggering a tax charge. Policies should be updated early, and payroll teams must apply the new treatment correctly.
Winner Three – Delay to ECOS Company Car Changes
Employee Car Ownership Schemes allow employees access to vehicles outside standard company car arrangements. Legislation planned to bring more ECOS vehicles within company car tax from 6 April 2026.
The Budget delayed these changes until 6 April 2030.
What the Budget Confirmed
The delay prevents immediate cost increases for employers and employees. However, the change has not been cancelled. Employers should still assume the rules will arrive and plan accordingly.
Loser – Removal of Flat-Rate Homeworking Relief
An administrative easement allowed employees to claim £6 per week for additional homeworking costs without evidence. That easement ends from 6 April 2026.
This change affects many employees who work from home regularly.
Financial Impact on Employees
The loss reduces annual tax relief. A higher-rate taxpayer loses £124.80 each year. A basic-rate taxpayer loses £62.40. These figures may appear modest, but they add up across a workforce.
What Still Applies
Employers can still pay £6 per week tax-free to cover homeworking costs. Employees can also claim actual additional costs, but they must keep records and evidence. In practice, many employees will not pursue these claims.
This change shifts effort away from HMRC and onto individuals.
What Employers Should Do Now
Employers should review company car policies and confirm which vehicles qualify for the PHEV easement. Expense and payroll policies need updating before April 2026, and payroll teams should receive training early.
Clear communication matters. Employees will notice the loss of homeworking relief, and silence creates confusion. Clear explanations build trust.
Why These Benefit in Kind Changes Matter
Benefit in kind changes rarely grab headlines, but they directly affect take-home pay and employer costs. Temporary reliefs soften longer-term tightening, while administrative simplicity often shifts work elsewhere.
Employers who plan early stay in control.
Call to Action
If you want clarity on how these benefit in kind changes affect your organisation, book a tax diagnostic with I Hate Numbers. You will receive clear guidance, practical steps, and straight answers.
At I Hate Numbers, we help businesses and individuals make smart financial decisions. From tax allowances to bookkeeping, we give you the support you need.
Want to explore more ways to increase income and reduce tax? Book a FREE 15 min Zoom meeting with us today.
Plan it, Do it & PROFIT!