HMRC to Automatically Update PAYE Tax Codes from April 2026
If you're employed in the UK, changes are coming to how your tax code is calculated. Starting in April 2026, HMRC will begin automatically removing certain employment expenses and higher rate Gift Aid relief from PAYE tax codes where they no longer appear accurate or relevant to your current circumstances.
This significant policy shift aims to tackle widespread issues with outdated claims and coding errors that have persisted for years, resulting in both overpayments and underpayments of tax.
What's Changing?
From the start of the 2026-27 tax year, HMRC will automatically review and update tax codes using the most current information available from taxpayer records. The focus is on two main areas:
Employment Expenses: Claims for work-related expenses that no longer apply will be removed from your tax code.
Higher Rate Gift Aid Relief: Tax relief for charitable donations at higher rates will be removed if it has been coded for three consecutive years without supporting Self Assessment returns.
Why Is HMRC Making These Changes?
PAYE tax codes instruct your employer on how much income tax to deduct from your salary. When these codes contain incorrect or outdated information, it leads to tax collection errors that can persist year after year.
Recent reviews have identified significant problems with historical claims remaining on individual records long after they should have been updated. By automating the removal of questionable claims, HMRC hopes to reduce administrative burden for both the tax authority and employers, while ensuring greater accuracy for taxpayers.
When Will Employment Expenses Be Removed?
Employment expenses exceeding £120 will be removed from your PAYE code under specific conditions:
You have no current PAYE income
There's been a complete tax year employment gap since the expense was first claimed
You haven't submitted a Self Assessment return since 2021-22, despite being required to do so for employment expenses
Your claimed employment expenses in your tax code are higher than those declared in your 2022-23 Self Assessment return
These criteria are based on cross-referencing compliance data and filing records to identify claims that may no longer be valid.
How Will Gift Aid Relief Be Affected?
Higher rate Gift Aid relief will be removed from your PAYE code if:
The same amount has been coded for at least three consecutive years,
AND you haven't submitted a Self Assessment return during that period
This ensures that Gift Aid relief accurately reflects your current charitable giving and eligibility for higher rate tax relief. If you remain eligible, you can restore your claim by submitting appropriate evidence through Self Assessment or HMRC's online services.
What Should You Do?
Check Your Tax Code: If you'll be affected, HMRC will send you an updated tax code notice. Review it carefully for accuracy, particularly if you've experienced changes in employment or charitable giving.
Keep Records: Maintain documentation supporting all claims made through PAYE or Self Assessment. This will be essential if you need to challenge an adjustment.
Challenge Incorrect Adjustments: If you believe HMRC has removed a legitimate claim from your tax code, contact them immediately or submit supporting information through government digital services. Your claim can be reconsidered if you provide the necessary evidence.
Regular Reviews: Make it a habit to periodically review your PAYE code, especially after job changes or shifts in your financial circumstances.
The Bottom Line
While these changes may initially impact individuals with historical or ongoing claims, the update is designed to benefit everyone in the long run. By ensuring tax codes reflect current circumstances, HMRC aims to reduce errors, simplify processes for employers and employees, and improve the accuracy of tax collection.
The key takeaway? Stay informed about your tax code and be proactive about reviewing it. If you have legitimate ongoing expenses or Gift Aid claims, make sure they're properly documented and up to date with HMRC.
For additional support understanding your coding notices and maintaining tax compliance, digital tools and HMRC's online services can help you navigate these changes with confidence.
