The 2026/7 payroll changes employers need to know in summary:
The 2026/27 tax year introduces several important payroll changes for UK employers, including National Minimum Wage increases, updates to statutory payment rates, and significant reforms to Statutory Sick Pay (SSP) such as day-one eligibility and removal of the Lower Earnings Limit. Employers will also need to account for revised Benefit in Kind (BiK) rates, updated tax thresholds, and new employment rights around parental leave. Reviewing payroll processes, systems, and policies ahead of April is key to staying compliant and avoiding costly errors.
Each new tax year brings a fresh set of changes for payroll teams and employers – and 2026/27 is no exception.
From updated statutory rates to evolving employment legislation, there’s plenty to keep track of, and getting it right really matters. Mistakes in payroll aren’t just frustrating; they can lead to compliance risks, employee dissatisfaction, and unnecessary admin for already stretched teams.
The new tax year officially begins on 6 April 2026, and with it comes a series of updates that will affect how payroll is processed across UK organisations. While some changes are routine, others may require closer attention, particularly where they impact calculations, reporting, or your internal processes.
In this article, I’ll walk you through the key payroll changes for 2026/27, what they mean in practice, and where it’s worth taking a second look at your current approach.
So, whether you’re reviewing systems, sense-checking processes, or simply making sure nothing slips through the cracks, this guide will help you head into the new tax year feeling prepared and in control.
The key payroll changes taking place from April 2026
Several updates coming into effect this year will have a direct impact on payroll processing, employee pay, and statutory entitlements. While some are expected annual changes, others may require adjustments to how payroll is managed day to day. The most notable updates include:
- National Minimum Wage increases
- Changes to Statutory Sick Pay eligibility and payment rules
- Updated statutory payment rates
- Changes to company car Benefit in Kind rates
- Updated tax bands and payroll thresholds
The following legislative changes take effect in the 2026/27 tax year and may impact how you process payroll after completing year end. However, all other rates and thresholds will remain unchanged.
National Minimum Wage increases
The National Minimum Wage (NMW) and National Living Wage (NLW) set the legal minimum hourly pay rates for eligible workers in the UK. Updated rates came into effect from 1 April 2026, and they’ll be as follows:
Want to be sure you’re paying your own employees correctly? Use the National Minimum Wage calculator to check if you’re paying an employee the National Minimum Wage.
What should employers check?
Employers should review pay rates to ensure all employees continue to meet the applicable minimum wage requirements. Payroll teams should also ensure that:
- salary sacrifice arrangements do not reduce pay below minimum wage.
- age-related wage band changes are applied correctly.
- apprentice pay rates meet current legislation.
Changes to Statutory Payment Rates
One of the most notable payroll updates this year relates to Statutory Sick Pay (SSP), with changes that could affect both eligibility and how payments are calculated.
As with other statutory payments, even small rate adjustments can have a knock-on effect across payroll processes – from system updates and compliance checks to employee communications. That makes it important to review not just the new rates themselves, but also how they’re applied within your existing payroll setup.
In this section, we’ll look at:
- Updated Statutory Payment Rates
- SSP from Day One
- Removal of the Lower Earning Limit (LEL)
2025-2026 Statutory Payment rates
These rates apply from April 6th, 2026:
Type of payment or recovery |
Rate 2025/26 |
Rate 2026/27 |
| Statutory Sick Pay (SSP) | £118.75 | £123.25 |
| Statutory Adoption Pay (SAP) | £187.18 | £194.32 |
| Statutory Maternity Pay (SMP) | £187.18 | £194.32 |
| Statutory Neonatal Care Pay (SNCP) | £187.18 | £194.32 |
| Statutory Paternity Pay (SPP) | £187.18 | £194.32 |
| Statutory Shared Parental Pay (ShPP) | £187.18 | £194.32 |
| Statutory Parental Bereavement Pay (SPBP) | £187.18 | £194.32 |
SSP payable from Day One
Currently, employees must wait three unpaid “waiting days” before SSP begins. From April 2026, that all changes:
- Waiting days will be abolished.
- SSP will be payable from the first day of sickness absence.
This change will particularly benefit employees with short-term illnesses, ensuring they receive financial support immediately. In practice, this means that new employees may be eligible for SSP immediately once employed, but they need to be on the employer’s payroll to qualify.
Removal of the Lower Earnings Limit (LEL)
At present, employees must earn at least the LEL to qualify for SSP. From April 2026:
- The LEL will be removed.
- All employees, regardless of income level, will be eligible for SSP.
This means that even part-time or lower-paid staff will have access to sick pay from the first day of absence.
New SSP calculation
Under the new rules, SSP will be calculated as the lower of:
- 80% of an employee’s average weekly earnings, or
- The flat rate, which will be £123.25 per week (2026/27).
For many employers this will require reviewing sickness absence policies and payroll calculations.
Employment Act Changes
-
Paternity Leave and Unpaid Parental Leave
From 6 April 2026, employees will be entitled from their first day of employment to take:
- Paternity Leave (leave entitlement only)
- Unpaid Parental Leave
This removes the current service requirements:
- Paternity Leave → removes qualifying service test
- Unpaid Parental Leave → removes 1 year’s continuous service requirement
-
Company Car Benefit in Kind (BIK) Percentages
For the 2026–27 tax year, Company Car Benefit in Kind (BIK) percentages for petrol, diesel, and hybrid vehicles will continue to be calculated based on CO₂ emissions, in line with HM Revenue & Customs (HMRC) rules.
So, what’s changing?
From 6 April 2026:
- BIK percentages will increase by 1 percentage point across most CO₂ emission bands. This applies to:
- Petrol cars
- Diesel cars (including the diesel supplement where applicable)
- Hybrid cars (rates based on CO₂ emissions and electric range)
It’s worth noting that electric vehicles (0 g/km) are not covered in this update and follow separate published rates. And, these increases form part of the government’s previously announced multi-year BIK framework – not as the result of a new policy introduced this year.
To ensure your scheme remains compliant, your payroll team should review your company car policies and ensure payroll systems are updated accordingly.
-
Van and Fuel Benefit Charges
From 6 April 2026, the following charges will increase in line with CPI:
Scottish Income Tax Bands
In the 2026/27 tax year, employees subject to Scottish income tax will see the following rates applied:
Actions for payroll professionals
With the new tax year upon us, it’s worth taking the time to sense-check your payroll processes. Even relatively small changes to rates, thresholds, or legislation can have a wider impact if they’re missed or applied incorrectly.
A short review now can save a lot of time (and stress) later. It also gives payroll teams the chance to spot any gaps, update systems, and make sure everything is aligned before the first pay run of the year.
Key areas to review include:
- Employee tax codes following HMRC updates
- Statutory payment rates and how they’re applied
- National Minimum Wage compliance across your workforce
- Sickness policies in light of SSP changes
- Company car benefits and Benefit in Kind (BiK) calculations
Taking a proactive approach here helps reduce the risk of errors, avoids last-minute fixes, and gives you confidence that payroll is running as it should from day one of the new tax year.
If you’re finding these annual updates increasingly time-consuming to manage, it might be worth considering how much of the process could be simplified. With Cezanne in-house payroll software, updates to rates and legislation are handled for you, helping ensure accuracy, reduce manual admin, and keep everything running smoothly behind the scenes.
About the author
Modupe Magbagbeola is Cezanne’s Head of Payroll Services, and has been helping clients manage their payroll operations for over ten years. A skilled and knowledgeable payroll professional, she’s passionate about staying at the forefront of innovation and connecting with professionals from various fields around the world.
