HMRC has issued an update on relief provided via individuals’ PAYE coding notices for valid employment expenses incurred for business purposes. The changes also apply to gift aid relief for higher rate taxpayers.

If certain conditions are met, based on data held for current and previous years, HMRC will remove employment expenses and/or gift aid relief from PAYE coding notices issued for tax years 2026/27 onwards.

Employment expenses

For taxpayers that have employment expenses over £120 coded, their codes have been amended if they also meet one of the following criteria:

• no current PAYE income
• an employment gap of a full tax year since the employment expense was claimed
• no self-assessment (SA) footprint since 2021/22, where there are indicators that the expense should have been resubmitted via SA
• employment expenses within their code are higher than their 2022/23 SA return.

Where HMRC has data that indicates that the taxpayer’s circumstances have changed since they applied for employment expenses, HMRC is taking action to correct that tax code.

Higher rate gift aid relief

For taxpayers that have higher rate gift aid relief coded, their codes have been amended to remove the relief from 2026-27 if they meet all of the following criteria:   

• the same amount of gift aid relief has been coded for at least three years; and, 
• there has been no SA footprint for at least three years. 

As the amount coded has not changed for at least three years, HMRC states that it is highly unlikely the taxpayer has claimed or confirmed the relief via telephone, webchat or in writing. HMRC says its research indicates the majority of regular charitable donations do not continue beyond 12-18 months.  

If the taxpayer believes that they remain entitled to gift aid higher rate relief and/or employment expenses from April 2026, they should submit their claim via the normal BAU processes.  

Individuals not under self-assessment will need to review their PAYE coding notices carefully to ensure they continue to obtain relief for such costs via their employment income if they have continued to incur these costs. They can do this and update HMRC on any changes required to their PAYE coding notices via their Personal Tax Account.

Practitioners acting for clients under self-assessment may find it easier to claim these within their client’s SA returns, explaining the reasoning behind any changes to the PAYE coding notices. Practitioners may also wish to update their employer clients about these changes as they may have to field an increase in queries from their employees about their tax codes having changed.