What’s changing in the 2026/2027 tax year?

The 2026/2027 tax year brings regulatory changes that every employer needs to know and master. Our in-house CIPP payroll experts have broken down exactly what you need to know. So, let’s dive straight into the critical updates, from the National Living Wage rise through to major Statutory Sick Pay reform, to ensure your business is fully prepared.

What are the key changes for this new tax year?

Let’s dive in to the key tax year changes from HMRC and the UK Government for the 2026/2027 tax year. For more general information on closing out the current tax year, check out our overview on how to prepare for the new tax year.

National Minimum Wage (NMW) / National Living Wage (NLW) rates confirmed

First up on the agenda is the National Minimum Wage (NMW):

• Following the recommendations from the Low Pay Commission (LPC), the National Living Wage (NLW) will increase on the 6th of April 2026 to £12.71 for those aged over 21.

• For workers who fall into the 18-20 year old bracket, wages will see a significant increase to £10.85, as the government moves towards a single adult rate.

• For those aged 16-17, the minimum hourly rate will increase to £8.00.

• The Apprentice rate will also increase to £8.00 per hour. This applies to apprentices under 19, or those aged 19 and over who are in their first year.

Use the table below to check the new payment rates for your employees. It is vital to communicate these changes to employees well in advance.

What are the statutory leave rates and SSP reforms?

Significant changes are coming to Statutory Sick Pay (SSP) as part of the Employment Rights Bill reforms, alongside the usual rate increases.

Statutory Sick Pay (SSP) reform: From April 2026, waiting days for SSP are being abolished, and SSP will be a day one right for every employee. Additionally, the Lower Earnings Limit (LEL) will no longer act as a barrier to eligibility. This will ensure support is available from the first week of sickness independently of earnings, and regardless of their work schedule.

• New rate: £123.25 per week.

• Eligibility: All employees are eligible. For those earning below the flat rate, SSP will be calculated as the lower of £123.25 or 90% of their average weekly earnings.

Other Statutory Payments: Standard rates for maternity, paternity, and adoption leave pay are expected to increase by approximately 3.8% (based on the September Consumer Prices Index, CPI). To ensure your team is paid the correct statutory amounts if they take leave during this period check out the following table.

What are the National Insurance threshold changes?

Most National Insurance thresholds will remain frozen until 2028, but the Lower Earnings Limit (LEL) has seen a small adjustment. This affects how much employee National Insurance is deducted each month. Whether you run payroll weekly or every month, these thresholds will apply to gross earnings in the pay period.

Will there be any change to the Employer Class 1 National Insurance rate?

Following the increase in April 2025, the Employer Class 1 National Insurance rate remains at 15% for the 2026/2027 tax year. Since correctly calculating National Insurance contributions is every employer’s responsibility, you must ensure your employee’s contributions are accurate for every pay date and all standard National Insurance categories.

Employment Allowance

The Employment Allowance remains at the increased level of £10,500 for eligible employers, shielding smaller businesses from the full impact of Employer NI costs. This relief is vital for sustaining employment in small businesses, and effectively lowers the cost of employment.

Student loan thresholds

Student loan thresholds are typically confirmed early in the new year. Plan 1 and Plan 2 thresholds (£501 and £547 weekly, respectively, for 2025/26) often see adjustments based on inflation or policy decisions. We recommend checking the official HMRC guidance closer to April for the precise 2026/2027 figures.

Scottish tax band and thresholds

The Scottish Budget (typically announced in December or January) will confirm the bands for 2026/2027. Given the fiscal drag policies currently applied in the rest of the UK, thresholds may remain frozen, or see minimal targeted increases.

What are other changes to look out for in 2026?

What are the updates on the mandatory payrolling of benefits?

While it was originally announced that payrolling benefits would become mandatory from April 2026, HMRC has delayed this mandate until April 2027.

• For 2026/2027: Payrolling benefits remains voluntary, though many employers find this method much more efficient.

• Preparation: We strongly recommend employers use this extra year to prepare. You can still register to payroll benefits voluntarily to streamline your processes ahead of the 2027 deadline. Using compliant payroll software can simplify this transition significantly. Registration must be completed via your online HMRC account by April in order to take effect in the next tax year.

• P11Ds: If you do not payroll benefits voluntarily, you must continue to submit P11D forms for the 2026/2027 tax year. These forms typically need to be prepared by June to meet the July deadline.

What effects will the Employment Rights Bill and Fair Work Agency have?

Several measures from the Employment Rights Bill are expected to come into force or begin implementation phases in 2026:

• Fair Work Agency: This is expected to launch in April 2026, and will enforce holiday pay, minimum wage, and statutory sick pay compliance. This new service will consolidate enforcement powers, as detailed in the government’s Fair Work Agency factsheet.

• Day one rights: Protections against unfair dismissal and access to paternity/parental leave from day one are key focuses due to be implemented in the coming year. This represents a significant shift in employment law and working practices that will shape the future of work.

• Trade union rights: New provisions may also affect trade union access and recognition in the workplace.

Are you ready for the new tax year?

Preparing for the new tax year demands more than just marking a date on the calendar. With significant updates to the National Living Wage, Statutory Sick Pay, and National Insurance, ensuring your business is compliant from day one is essential.

Readiness means reviewing your current payroll processes to ensure they can handle these legislative shifts without error. Now is the time to audit your systems and verify that employee data is up to date.

Streamlining your operations can make a huge difference. By automating payroll tasks and ensuring accurate HMRC RTI submissions, you can reduce the administrative burden. Access to clear finance and HR reports will also help you forecast the financial impact of these changes.

Finally, staying on top of compliance is critical. Therefore, ensuring you have completed a comprehensive payroll year-end checklist will help you manage all essential deadlines and tasks to close out the current year with confidence.

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