Expanding Workplace Benefits Relief: A Complete Guide to the New Reimbursement Rules

The start of the 2026/27 tax year has brought a highly anticipated and very welcome simplification to the UK’s workplace benefits and expenses regime. From 6 April 2026, employers can formally reimburse employees for the costs of eye tests, seasonal flu vaccinations, and homeworking equipment completely free from Income Tax and National Insurance contributions (NICs).

First announced in the Autumn Budget 2025, this measure addresses a long-standing frustration for businesses. By aligning the tax treatment of out-of-pocket reimbursements with direct employer-provided benefits, the government has cut through unnecessary red tape to better reflect modern hybrid and remote working practices.

Here is a comprehensive guide from Hewitt’s Payroll outlining exactly what has changed, what the conditions are, and how your business should adapt.

The Problem This Solves: Old Rules vs. New Rules

Historically, the UK tax system drew an arbitrary distinction between an employer paying a supplier directly and an employer reimbursing an employee who paid out of their own pocket. This created massive administrative friction, particularly for smaller businesses or those managing dispersed, remote teams.

• Eye Tests & Glasses: Under the old Section 320A of ITEPA 2003, eye tests and corrective appliances for Display Screen Equipment (DSE) users were only exempt from Income Tax if the employer arranged and provided them directly. Reimbursing an employee who paid for their own test triggered income tax reporting complexities.
• Flu Vaccinations: There was no specific statutory tax exemption for flu vaccines. To avoid a benefit-in-kind (BIK) charge, employers had to navigate complex corporate voucher schemes or arrange on-site clinics. Reimbursing an employee for getting a jab at their local pharmacy was fully taxable and liable to Class 1 NICs.
• Homeworking Equipment: While employer-provided office chairs or laptops were tax-exempt under Section 316, reimbursing an employee who bought their own office setup to work effectively from home was treated as taxable earnings.

From 6 April 2026, these hurdles have been removed. The tax treatment is now identical whether you arrange and pay the provider directly, issue a voucher, or simply reimburse the employee’s expenses.

Detailed Breakdown of the New Exemptions

HMRC has updated and introduced specific legislative clauses to expand this relief. The three core areas covered are:

1. Eye Tests and VDU/DSE Glasses

• The Legislative Change: Section 320A of ITEPA 2003 has been extended to encompass reimbursements.
• The Conditions: The exemption automatically applies where an employee buys a qualifying eye test required for Display Screen Equipment (DSE) use. If the test shows that special corrective appliances (glasses) are required specifically for Visual Display Unit (VDU) use, the reimbursement for those glasses is also exempt. Note: Regular, everyday prescription glasses do not qualify.

2. Seasonal Flu Vaccinations

• The Legislative Change: A brand-new section—Section 320D—has been introduced to exempt both the direct provision and the reimbursement of influenza vaccinations. A matching Class 1 National Insurance disregard has also been implemented under Section 3(3) of the SSCBA 1992.
• The Conditions: This exemption applies automatically unless the benefit is provided via a salary sacrifice arrangement. If an employee gives up a portion of their salary in exchange for the vaccine reimbursement, the tax exemption will not apply.

3. Homeworking Equipment and Supplies

• The Legislative Change: A new section—Section 316ZA—has been inserted into the Income Tax legislation alongside a new Class 1 NIC disregard. This exempts the reimbursement of expenses incurred by an employee on behalf of their employer for accommodation, supplies, or services used in performing employment duties.
• The Conditions: This explicitly covers the essential equipment employees need to work safely and effectively from home (such as desks, ergonomic chairs, or computer peripherals). The items must be primarily required for the performance of their employment duties.

What This Means for Employers and Payroll Reporting

The single best feature of this expansion is its administrative simplicity. It has been designed to minimise ongoing compliance burdens:

• No PAYE or P11D Reporting: Where the statutory conditions are met, the exemption applies automatically. You do not need to report these reimbursements on year-end P11D forms, nor do you need to operate PAYE on them through your regular payroll runs.
• No National Insurance Liability: There are no Class 1 (employee/employer) or Class 1A (employer) National Insurance contributions to calculate or pay.
• No HMRC Approval Needed: Employers do not need to submit formal claims, change their foundational payroll reporting processes, or seek prior approval from HMRC to utilize these rules.

A Crucial Warning on the Transitional Cut-off Date

Because these rules are now active for the 2026/27 tax year, internal teams must pay close attention to the date the cost was incurred.

The new exemptions strictly apply to eye tests, flu vaccines, or equipment provided or reimbursed on or after 6 April 2026.

If an employee arranged and paid for a flu vaccination or an eye test before 6 April 2026, and they submit the expense claim to you now, it must be processed under the previous rules. In most cases, that historical reimbursement will remain fully taxable and liable to Class 1 National Insurance contributions unless another pre-existing, niche exemption applies.

Action Plan: What Your Business Needs to Do Now

While the administrative process is hands-off, employers should take a few practical steps to align their internal processes with the updated legislation:

1. Update Your Employee Expense Policy: Ensure your staff handbooks and expense submission systems are updated to clarify that out-of-pocket expenses for DSE eye tests, seasonal flu jabs, and pre-approved homeworking kits are now fully reimbursable.
2. Establish Spending Caps and Guidelines: To maintain commercial control, define clear internal boundaries for what constitutes “eligible homeworking equipment” or “VDU-specific eyewear” based on active HMRC guidance, and put reasonable monetary caps on claims.
3. Brief Your Accounts Payable and Payroll Teams: Ensure the staff members who review monthly expense receipts understand the 6 April 2026 cut-off date and know not to flag these specific reimbursements for year-end benefit tracking.
4. Maintain Clear Evidence: As with all business expenses, ensure you retain robust records and receipts. HMRC will monitor the application of these reliefs through standard, routine tax compliance activity.

Need Help Adapting Your Payroll?

This legislative shift is a massive win for business efficiency, eliminating complex voucher schemes and helping employers support employee well-being seamlessly.

If you need assistance updating your payroll parameters, restructuring your workplace benefits strategy, or ensuring your internal expense processes align cleanly with the latest HMRC guidance, Hewitt’s Payroll is here to help.

Contact our team today to ensure your payroll remains completely accurate, compliant, and optimized for the new tax year.