Businesses in the sports and entertainment industries have been given an additional year to prepare for a significant change to the tax treatment of employment-related image rights payments.
The Government has confirmed that from 6 April 2028, image rights payments related to an individual's employment will be treated as taxable employment income and taxed in the same way as wages. The measure had originally been due to take effect from April 2027, but implementation has been delayed by a year to give employers and employees more time to prepare.
The change is expected to be particularly relevant to professional sport. However, image rights arrangements can also arise in entertainment and other sectors where an individual's name, image, likeness, voice, characteristics or wider personal brand has commercial value.
For sports organisations in particular, that review should not necessarily stop at image rights. The change provides a useful trigger to consider the wider employment tax and remuneration framework, including how payments, benefits and other arrangements involving players and employees are documented, processed and reported.
What is changing from April 2028?
Under the announced changes, image rights payments related to an employment will be taxable as employment income, regardless of whether the payment is made directly to the employee or through a third party. Employers will be required to operate PAYE on affected payments, with Class 1 employee and employer National Insurance contributions also applying.
Why could the change matter particularly to sports organisations?
Image rights arrangements can form part of the wider remuneration and commercial structures used within professional sport. Where payments fall within the new employment income treatment, organisations may need to consider whether their projected employment costs change from April 2028.
The implications could extend beyond the tax treatment of an individual payment to areas including:
- employer National Insurance and total remuneration costs;
- PAYE and payroll processes;
- budgeting and forecasting;
- existing and future contractual commitments; and
- commercial, promotional and remuneration structures.
What should employers review before April 2028?
Although implementation has been delayed, organisations with existing image rights arrangements can use the additional time to establish their exposure and consider whether changes may be required.
1. Identify existing image rights arrangements
Establish which employees have image rights arrangements and how payments are currently structured, including payments made directly to individuals and those involving image rights companies or other third parties.
2. Review the contractual position
Consider what rights are being acquired, who owns or controls them and how the image rights arrangement interacts with the individual's employment contract. Particular attention should be given to arrangements that will remain in force beyond 6 April 2028.
3. Establish which arrangements could be affected
The new measure applies to image rights payments that are related to an individual's employment. An entirely separate arrangement with a third party is outside the scope of this specific measure. Understanding the substance, purpose and documentation of existing arrangements will therefore be important in establishing which payments may fall within the new employment income treatment.
4. Model the potential employment costs
Businesses should consider what the new treatment could mean for the overall cost of relevant remuneration arrangements. This should include potential employer National Insurance and payroll consequences, rather than looking solely at the individual's tax position.
For organisations with multiple affected contracts, modelling the aggregate impact could also help inform budgets and longer-term workforce cost forecasts.
Employers should consider how PAYE liabilities arising on image rights income will be funded and collected. In many cases, an employee's regular salary may be insufficient to cover the tax due, particularly where significant image rights payments are involved. As part of preparations for April 2028, employers should review recovery mechanisms and engage early with affected individuals to agree how any resulting PAYE liabilities will be settled.
5. Factor the change into future negotiations
Where new or renewed contracts will extend beyond April 2028, employers should consider the potential tax and employer-cost position before remuneration packages are agreed. This could make the change relevant to negotiations well before the implementation date itself.
6. Review payroll and employment tax readiness
Organisations should consider what information payroll teams will need to identify and process affected payments correctly from April 2028. Where payroll processes are already being reviewed, consider the wider control environment rather than making changes solely for image rights. This may require coordination between tax, payroll, finance, HR and commercial teams, particularly where non-standard remuneration sits outside normal payroll processes.
Our guide to payroll compliance and regulatory scrutiny covers the wider controls employers should have in place.
Look beyond image rights
The April 2028 change also provides a useful trigger for sports organisations to consider employment tax compliance more widely. Areas that may warrant review include agent and intermediary fees, PAYE, expenses and benefits, National Minimum Wage compliance, internationally mobile individuals and the governance supporting complex remuneration arrangements.
Agent fees provide a good example: HMRC expects football clubs to retain evidence supporting the commercial basis for payments and any allocation between services provided to the club and player, rather than relying on a default split.
A wider readiness review can therefore be more valuable than making payroll and process changes specifically for image rights, only to revisit related employment-tax risks separately later.
What about individuals?
Individuals receiving employment-related image rights payments may also see the tax profile of those payments change from April 2028. Those who receive such payments via a separate company or trade may be able to claim relief against the potential double tax charge which would otherwise arise.
Those with more complex arrangements may want to review how income from employment, sponsorship, endorsements and other commercial use of their personal brand is structured and documented. This can be particularly important for internationally mobile individuals or those with significant commercial interests outside their primary employment.
We're here to help
Our Employment Tax specialists can help employers review existing image rights arrangements and model the impact of the April 2028 changes, while also taking a wider view of employment tax risk.
Where appropriate, our Private Client and other specialists can also consider the position of affected individuals and more complex commercial arrangements.
If your organisation has image rights arrangements and other more complex commercial arrangements, now is a useful time to consider whether a broader employment tax and payroll review would provide greater value than addressing the 2028 change in isolation. Speak to your usual Azets adviser or a member of our Employment Tax team.
