UK Payroll Changes 2026/27
Introduction
From 1 April 2026, there is an increase across all National Minimum Wage bands.
Key payroll considerations:
✔ Ensure payroll systems are updated before the first April pay run
✔ Review pay structures where wage compression may occur
✔ Communicate changes clearly to employees and managers
National Minimum Wage from 1 April 2026
| Category | 2025/26 | 2026/27 |
|---|---|---|
| Aged 21 and above (national living wage rate) | £12.21 | £12.71 |
| Aged 18 to 20 inclusive | £10.00 | £10.85 |
| Aged under 18 (but above compulsory school leaving age) | £7.55 | £8.00 |
| Apprentices in their first year | £7.55 | £8.00 |
With increases across all bands, organisations employing younger workers or apprentices may see a notable impact on payroll costs and budgeting for 2026/27.
National Insurance Contributions
The rates and thresholds for the calculation of employee (primary) and employer (secondary) NIC remain unchanged from 2025-26, although the ‘Lower Earnings Limit’ (LEL) has increased slightly to £129 / week.
| Lower Earnings Limit (LEL) | Primary Threshold (PT) | Secondary Threshold (ST) for Employer NIC | Upper Earnings Limited (UEL) | |
|---|---|---|---|---|
| Weekly | 129 | 242 | 96 | 967 |
| 4-Weekly | 516 | 967 | 385 | 3,867 |
| Monthly | 559 | 1,048 | 417 | 4,189 |
| Directors Annual | 6,708 | 12,570 | 5,000 | 50,270 |
New Statutory Sick Pay (SSP) rules and rates from 6 April 2026
The Employment Rights Act (2025) introduced a number of changes to the way that Statutory Sick Pay (SSP) will operate from 6 April 2026. A summary of these changes are given below:
Employees who are absent for one single, complete day of sickness (or more) now qualify for SSP (in previous years an employee had to be sick for 4 continuous days or more to qualify for SSP).
SSP is payable from the first complete day of sickness (in previous years the first 3 days of absence from work due to sickness were classed as ‘waiting days’ during which no SSP was payable).
SSP is paid at a weekly rate of £123.25 OR at 80% of the employees Average Weekly Earnings (AWE), whichever is the lower. (The weekly SSP rate was £118.75 in 2025-26).
The rule requiring that employees must be paid above the Lower Earnings Limit (LEL) in order to qualify for SSP has been abolished. This change means that more workers will now qualify to be paid SSP.
A ‘Transitional Protection‘ policy has been introduced as a temporary measure to protect low earners against a potential drop in their level of SSP.
Statutory Parenting Pay rates and employer reclaim percentages from 6 April 2026
The weekly rate of ‘Statutory Parenting Pay’ has risen from £187.18 (for tax year 2025-26) to £194.32 for tax year 2026-27. ‘Statutory Parenting Pay’ includes Statutory Maternity, Paternity, Adoption, Shared Parental, Parental Bereavement and Neonatal Care Pay.
Employers can currently reclaim 92% of employees' Statutory Parenting Pay. If a business has paid £45,000 or less in Class 1 National Insurance (ignoring any reductions like Employment Allowance) in the last complete tax year they also qualify for Small Employers Relief, and reclaim 100% of the Statutory Payment, plus an additional amount of ‘compensation’. From 6 April 2026, the rate of compensation will increase from 8.5% to 9%. Employers who qualify for Small Employers Relief will therefore be able to reclaim a total of 109% from HMRC.
Student loan rates and thresholds – Plan 1, Plan 2, Plan 4 (Scotland), Plan 5 (New from April 2026) and Postgraduate loans
From 6 April 2026:
The threshold at which borrowers repay Student Loan Plan Type 1 loans rises from £26,065 to £26,900 per year – Type 1 loans are those issued to students before 2012. The rate remains at 9%.
The threshold for Student Loan Plan Type 2 loans (issued after 2012) rises from £28,470 to £29,385 per year. The rate remains at 9%.
The threshold for Student Loan Plan Type 4 loans (Scotland) rises from £32,745 to £33,795 per year. The rate remains at 9%.
The new (from April 2026) Student Loan plan Type 5 is introduced, with a threshold of £25,000 per year and a repayment rate of 9%.
The threshold for Postgraduate Loans (PGL), remains at £21,000 per year, and the rate remains at 6%.
No changes to Tax codes, Employment allowance and Auto Enrolment Pensions Qualifying Earnings.