Citation and commencement

1. These Regulations may be cited as the Income Tax (Pay As You Earn) (Amendment No. 3) Regulations 2026 and come into force on 5th November 2026.

Amendment of the Income Tax (Pay As You Earn) Regulations 2003

2. The Income Tax (Pay As You Earn) Regulations 2003(3) are amended by regulations 3 to 9.

3. In regulation 61A(4) (interpretation)—

(a)in the definition of “relevant amount”(5) for “120A, 154A or 203A” substitute “103A, 120A, 154A, 175A or 203A(6)”;

(b)in the definition of “specified benefit”(7)—

(i)after paragraph (ba) insert—

“(bb)section 97 (living accommodation),

(bc)section 103A (living accommodation: optional remuneration arrangements),”, and

(ii)after paragraph (fa) insert—

“(fb)section 173 (loans),

(fc)section 175A (loans: optional remuneration arrangements),”.

4. In regulation 61C (authorised employer) omit paragraph (9A)(8).

5. In regulation 61D (deductions and repayments of tax: general rule) in Step 1 in paragraph (1) for “or 61G” substitute “, 61G, 61GA or 61GB”.

6. After regulation 61G (method of calculating the cash equivalent or relevant amount of non-cash vouchers, credit-tokens and employment-related benefits), insert—

Method of calculating the cash equivalent of living accommodation

61GA.—(1) Where the specified benefit is living accommodation, the cash equivalent or relevant amount of the specified benefit is to be calculated in accordance with section 103 or 103A of ITEPA, as the case may be.

(2) For the purposes of paragraph (1), the authorised employer may make reasonable assumptions, based on a contract or agreement made with the specified employee, about information that is necessary for the calculation but that is not known on the date the calculation is made.

Method of calculating the cash equivalent of loans

61GB.—(1) Where the specified benefit is a loan, the cash equivalent or relevant amount of the specified benefit is to be calculated in accordance with section 175 or 175A of ITEPA, as the case may be.

(2) For the purposes of paragraph (1), the authorised employer may make reasonable assumptions, based on a contract or agreement made with the specified employee, about information that is necessary for the calculation but that is not known on the date the calculation is made.”.

7. In regulation 61H (modification of the general rule: cessation of employment but continuing benefit), in Step 2 in paragraph (2) for “or 61G” substitute “, 61G, 61GA or 61GB”.

8. In regulation 61I (modification of the general rule: in-year adjustments: change to the benefit during the year with effect from the date of the change), in Step 1 in paragraph (2)—

(a)in sub-paragraph (a)—

(i)after “94A,” insert “102, 103A,”, and

(ii)after “161,” insert “175, 175A,”, and

(b)in sub-paragraph (b) for “or 61G” substitute “, 61G, 61GA or 61GB”.

9. In regulation 61J (modification of the general rule: in-year adjustments: change to the benefit during the year with effect from the start of tax year and other changes), in paragraph (1)(b) for “or 61G” substitute “, 61G, 61GA or 61GB”.

Transitional provision - effect in relation to in year application for authorisation

10. For the purposes of regulation 61C(4) and (5) of the Income Tax (Pay As You Earn) Regulations 2003, the amendments made by these Regulations have effect for the tax year 2027-28 and subsequent tax years.