From April 2026, HMRC is automatically removing employment expenses and Gift Aid relief from PAYE tax codes—and it’s happening whether you’re ready or not.
This isn’t a suggestion. It’s not optional. And for many businesses and their employees, it will trigger unexpected tax bills, missed overpayments, and admin headaches if you don’t act now.
Here’s what’s coming.
What’s Changing
HMRC has always run on old data. Someone claims an employment expense once, HMRC codes it in, and it stays there forever—even if they’ve left the job.
From April 2026, they’re cleaning house. The rules are simple but broad.
Employment expenses over £120 will be removed if:
- The individual has no current PAYE earnings
- There’s been a full tax year gap in employment since the expense was claimed
- No Self Assessment return has been filed since 2021-22 (where employment expenses should have been resubmitted)
- The employment expenses in the tax code exceed what was claimed in the 2022-23 Self Assessment return
Gift Aid relief (higher-rate) will be removed if:
- The same amount of Gift Aid relief has been coded for at least three years
- No Self Assessment return has been filed for at least three years
Why It Matters
If you have employees, contractors, or run payroll at all, this affects you.
Here’s what actually happens:
For employees with outdated expenses: Someone’s been claiming £1,500 in employment expenses for five years. Last Self Assessment return? 2020. In April, the relief disappears. Their tax code goes up. They’re paying more tax every month. Most won’t notice until year-end, when they’re chasing an overpayment claim.
For Gift Aid claims: Same problem. Higher-rate relief disappears if there’s been no Self Assessment filing in three years. Tax code goes up, nobody expects it.
For CFOs and finance teams: This is an admin problem. You’ve got 50 people. 15 are affected. That’s 15 conversations, 15 notifications to explain, potentially 15 claims to consider filing.
What You Should Do Now
Don’t wait. Here’s what to do.
1. Audit your payroll
Pull a list of anyone with employment expense or Gift Aid relief in their tax code. Cross-reference with Self Assessment records and employment status. Find out who’s likely to be affected.
For employment expenses specifically, check:
- Do they still work for you? (If not, the relief will likely be removed anyway.)
- Have they filed Self Assessment in the past five years?
- Are the expenses still relevant to their role?
A few hours of work now beats scrambling in April.
2. File outstanding Self Assessment returns
If someone’s got relief in their tax code but hasn’t filed Self Assessment in years, encourage them to file. It’s not mandatory, but if they want to keep the relief, filing is the way to do it. HMRC uses Self Assessment records as the source of truth.
For higher earners claiming Gift Aid relief, this matters. One return can restore three years of history.
3. Document everything
When HMRC changes the codes in April, employees can appeal if they think it’s wrong. But you’ll need evidence. Keep copies of original expense claims, Self Assessment filings, employment records. If someone needs to challenge a removal, you want the paperwork ready.
What Employees Can Do
Tax code changes aren’t final. HMRC’s online service lets taxpayers appeal. They’ll need to prove the change was wrong—copies of Self Assessment returns, evidence of ongoing expenses, employment status.
You can’t appeal for them, but you can make sure they have the records if they need to appeal themselves.
The Bigger Picture
HMRC’s closing the tax gap. That’s the £14+ billion difference between tax owed and tax actually collected.
Automating these cleanups saves them work. They don’t wait for individuals to fix their own tax codes anymore—they fix them based on what they know.
Is it fair? Debatable. But this is where tax admin is going. Automated, data-driven. The burden shifts to businesses and employees to keep their records straight.
The Bottom Line
April’s coming fast. Pull your payroll records now. Identify who’s affected. Flag the outstanding Self Assessment returns. Get the paperwork organized.
It’s boring work. But it beats explaining overpayment claims and tax code changes to 15 people in May.
If you need help with this, reach out. We audit tax codes, prep for HMRC changes, and keep payroll compliance on track.