December 2025 - What UK Businesses Need to Know

Below, we break down the key changes - and what employers should be doing now to stay compliant and prepared.

1. New PAYE Responsibilities for Labour Supply Chains (from April 2026)

One of the most significant updates relates to new rules coming into effect on 6 April 2026 for labour supply chains. These changes will impact businesses that use:

• Umbrella companies
• Agencies
• Other outsourced labour arrangements

HMRC is strengthening compliance and due-diligence requirements to reduce tax avoidance within labour supply chains. Employers are encouraged to:

• Review HMRC’s updated guidance
• Assess the status of any umbrella companies or third-party suppliers
• Attend HMRC’s available webinars to understand the obligations

If your organisation relies on temporary or contracted labour, this is a critical area to prepare for early.

2. Updated Guidance on Optional Remuneration Arrangements (ORAs)

HMRC has clarified elements of the rules for Optional Remuneration Arrangements (OpRAs) - including those under section 228A of ITEPA.

This affects employers offering arrangements where employees give up salary in exchange for a benefit (or vice versa). If you operate salary sacrifice schemes or have flexible benefit structures, now is the time to review this clarification to ensure your policies remain compliant.

3. Important Update on Tax Refunds

A general update has been issued relating to tax refunds. HMRC advises employers to check whether the update affects any outstanding or expected refunds. This matters particularly for employers who have adjustments or corrections pending in their PAYE records.

4. Payrolling Benefits-in-Kind (BiKs)

HMRC continues to encourage payrolling as a smoother method for reporting employee benefits such as:

• Company cars
• Private medical insurance
• Other taxable perks

If you’re still relying on annual P11Ds, HMRC suggests reviewing whether payrolling could simplify your processes for the 2026/27 tax year.

5. Employment Rights Bill Consultations

The government’s Employment Rights Bill continues through a series of consultations, potentially affecting:

• Worker protections
• Employment legislation
• Employer obligations

Businesses should keep an eye on these developments, as they may require policy or process changes across HR and payroll functions.

6. “Tell ABAB” Survey Open for Feedback

HMRC’s Tell ABAB survey - designed to gather feedback from businesses and advisers - is now open. This is a useful opportunity to influence future HMRC services and guidance.

7. Housekeeping: PSA Details and Contact Information

HMRC highlights that incorrect company name or address details on a PAYE Settlement Agreement (PSA) can lead to delays or missed communication. Employers should verify:

• PSA information is correct
• HMRC has the right contact details on file

This simple check helps prevent administrative issues further down the line.

8. Penalties Issued for Late P11D / P11D(b)

HMRC has already issued penalties to employers who missed the 2024/25 P11D and P11D(b) deadlines. If you still have outstanding submissions, complete them as soon as possible to minimise penalty exposure.

How Employers Can Prepare

To stay ahead of these changes, UK businesses should:

• Review HMRC’s updated labour supply chain guidance
• Ensure ORA and salary sacrifice arrangements are compliant
• Consider transitioning to payrolling benefits-in-kind
• Keep employment law developments on your radar
• Double-check PSA and contact information held by HMRC
• Submit any outstanding P11D or P11D(b) returns immediately

How HARP Software Can Help

HARP Software supports organisations of all shapes and sizes in managing the full lifecycle of employer obligations - including:

• Tax and PAYE compliance
• Payroll processing and automation
• Benefits and reward management
• HR operations and workforce visibility
• Staying compliant with the Employment Rights Bill and other legislative changes

Whether you're navigating new PAYE obligations, modernising payroll processes, or preparing for regulatory updates, HARP gives you the tools, insights, and confidence to stay compliant and operate efficiently.

Want to simplify payroll, tax, and HR compliance?
Get in touch with HARP to see how we can support your organisation.