As we are approaching the 2026/27 tax year, we summarise the most critical updates in the Payroll Calendar.
Tax Rates & Thresholds
HMRC have confirmed the standard personal allowance for 2026/27 will remain at £12,570 until April 2031 and there are no changes to tax rates.
Scottish tax thresholds will alter slightly.
National Insurance Rates & Thresholds
The lower earnings limit (LEL) at which an employee qualifies for certain benefits including state pension, is increasing from £6,500 to £6,708 per annum.
There are no changes to the national insurance rates.
Statutory Sick Pay (SSP)
The Employment Rights Act 2025 is changing SSP From 6 April 2026 with payment due from the first full day of absence, removing the requirement for 3 waiting days. As advised in a previous update, employers need to consider their internal policies and update systems, processes and handbooks to reflect the change.
New rate: £123.25 per week or 80% of average weekly earnings (AWE) whichever is the lower.
Statutory Payment Rates & Leave
There is an increase to statutory parental payments from Sunday 5 April with the following payment types increasing to £194.32 or 90% of AWE whichever is the lower: –
*(rate for the first 6 weeks of 90% of AWE)
Small employers’ relief is increasing to 109% for those with total NI of £45k or less in the previous tax year. Your payroll contact will be able to determine if this is due.
Paternity and Parental leave will become a day 1 right from April 2026 with length of service criteria removed.
Student Loans
Student Loan Plan 5 will become the default plan type in England from April 2026 and the HMRC new starter checklist will be updated to include this.
National Minimum Wage (NMW)
New rates apply from 1 April 2026. They should be applied in the pay reference period that starts on or after this date. If any wages need increasing due to these changes, please inform your payroll contact: –
It is important that deductions do not reduce pay below the relevant rate, as penalties for non-compliance are significant. Examples of item’s that can count towards minimum wage calculations but not restricted to are: –
- Deductions for work equipment, uniform, meals, parking, holiday purchase.
- Salary sacrifice arrangements including pension sacrifice.
- £1 admin fee for court orders.
- Remember salaried workers hours must be tracked during the calculation year and any hours in excess paid.
Employment Allowance
Employment allowance for 2026/27 is unchanged at £10,500 per annum.
You cannot claim if:
- You are a single-director company and that director is the only employee paid above the secondary threshold, if you have 2 Directors then both must be paid over the secondary threshold of £5,000 per annum to be eligible.
- More than 50% of your work is in the public sector.
- You employ someone for personal/household work (like a nanny or gardener)
- You are a connected company and already claiming the allowance through another payroll. Connected companies and Employment Allowance: further guidance for employers and their agents – GOV.UK
If you think you are entitled to the allowance and have not claimed it previously, speak to your payroll contact.
HMRC Payments – Paying PAYE by Direct Debit
A reminder there is an added function so employers’ can pay their PAYE liabilities by direct debit. You only need to set this up once and payment will be automatically collected going forward.
This is restricted to employers only and there is no scope for agents to do this on your behalf.
How can you sign up for this?
This service can be access through Pay employers’ PAYE or through the business tax account dashboard.
Benefits in Kind
Payrolling Benefits will become mandatory from April 2027, so important procedures are in place well before the implementation date to ensure your systems and processes are aligned and the change communicated to employees. The only exception to this is beneficial loans and employer supported living accommodation which will remain voluntary.
If you intend to start payrolling benefits prior to this and do not already have an agreement in place with HMRC, you need to register before the start of 6 April 2026: https://www.gov.uk/guidance/paying-your-employees-expenses-and-benefits-through-your-payroll
Employees can no longer claim tax relief from HMRC for the £6 per week home working flat rate. It can however still be paid by the employer tax free.
If you would like any further information, please get in touch [email protected]
