Overview of changes for 2026/27
Payroll Legislation Update 2026/27 (UK)
Key payroll changes effective from 6 April 2026
If you run payroll in the UK, there are a handful of important changes to prepare for ahead of the 2026/27 tax year. This update summarises the main points for employers and payroll teams, with a focus on what’s changing and what you should do next.
Quick summary
Most income tax and National Insurance thresholds remain frozen
Lower Earnings Limit (NI) increases
Statutory payment rates increase (plus a significant SSP eligibility change)
National Minimum Wage increases from 1 April 2026
Student loan thresholds update for 2026/27
Key dates
1 April 2026: National Minimum Wage changes take effect
6 April 2026: UK tax year starts (income tax, National Insurance, statutory payment rates, student loans)
Income tax (England & Northern Ireland)
For 2026/27, the Personal Allowance and income tax thresholds remain frozen.
Personal Allowance: £12,570
Emergency tax code: 1257L
Tax bands
20% Basic Rate: £1 to £37,700
40% Higher Rate: £37,701 to £125,140
45% Additional Rate: Over £125,140
Tax Allowance | 2025/26 | 2026/27 | Change |
|---|---|---|---|
| £ | £ | £ |
Personal Allowance | 12,570 | 12,570 | 0 |
Income limit | 100,000 | 100,000 | 0 |
Reminder for higher earners
If an employee earns over £100,000, their Personal Allowance reduces by £1 for every £2 earned above that level. This is handled via HMRC tax codes and/or self-assessment rather than a separate payroll calculation.
Scotland (Scottish Income Tax)
Scottish Income Tax applies to employees with “S” prefixed tax codes.
From 6 April 2026, the Scottish rates/bands are expected to be:
Starter: 19%
Basic: 20%
Intermediate: 21%
Higher: 42%
Advanced: 45%
Top: 48%
2025/2026 | 2026/2027 | |
|---|---|---|
Starter (19%) | £ 1 - £ 2,827 | £ 1 - £ 3,967 |
Basic (20%) | £ 2,828 - £ 14,921 | £ 3,968 - £ 16,956 |
Intermediate (21%) | £ 14,922 - £ 31,092 | £ 16,957 - £ 31,092 |
Higher (42%) | £ 31,093 - £ 62,430 | £ 31,093 - £ 62,430 |
Advanced (45%) | £ 62,431 - £ 125,140 | £ 62,431 - £ 125,140 |
Top (48%) | Over £ 125,140 | Over £ 125,140 |
Wales (Welsh Income Tax)
Welsh Income Tax applies to employees with “C” prefixed tax codes.
Welsh rates remain aligned with England and Northern Ireland, using the same thresholds.
National Insurance (Class 1)
Most NI thresholds remain frozen, with a key increase to the Lower Earnings Limit.
Main thresholds (weekly)
Lower Earnings Limit (LEL): £129
Primary Threshold (PT): £242
Secondary Threshold (ST): £96
Upper Secondary Threshold (UST): £967
Contribution rates remain unchanged.
Employment Allowance
Employment Allowance remains at:
✅ £10,500 per year
If you’re unsure whether you qualify (or if your eligibility changes because of group structures, state aid rules, etc.), it’s worth reviewing before year end.
Statutory payments (from 6 April 2026)
Statutory parental payments
Lower Earnings Limit for eligibility: £129 per week
Standard weekly rate: £194.32 per week (or 90% of AWE if lower)
This applies to:
Statutory Maternity Pay (SMP)
Statutory Adoption Pay (SAP)
Statutory Paternity Pay (SPP)
Statutory Shared Parental Pay (ShPP)
Statutory Parental Bereavement Pay (SPBP)
Statutory Neonatal Care Pay (SNCP)
Statutory Sick Pay (SSP) — significant change
From 6 April 2026:
SSP weekly rate: £123.25 (or 80% of AWE if lower)
Earnings threshold for eligibility: shown as £0.00 per week
Why this matters: if the threshold is removed, SSP eligibility becomes much broader. That impacts:
absence policies and processes
payroll configuration and testing
employee communications
budgeting for sickness absence
Note: Because this is a major change, we recommend confirming your payroll software approach and employer policy wording ahead of April.
Workplace pensions (Auto-Enrolment)
Auto-enrolment triggers and qualifying earnings remain frozen:
AE trigger: £10,000
Lower qualifying earnings: £6,240
Upper qualifying earnings: £50,270
Student loans (from 6 April 2026)
Annual thresholds and deduction rates:
Plan 1: £26,900 at 9%
Plan 2: £29,385 at 9%
Plan 4: £33,795 at 9%
Plan 5: £25,000 at 9%
Postgraduate Loan: £21,000 at 6%
Payroll tip: Your software should update these automatically with the annual tables, but it’s still worth spot-checking the first April payroll run.
National Minimum Wage (from 1 April 2026)
New hourly rates:
Age 21+ (National Living Wage): £12.71
18–20: £10.85
16–17: £8.00
Apprentice: £8.00
Accommodation offset: £11.10
Compliance reminder: Minimum wage isn’t just the headline hourly rate. Time worked, salary sacrifice, deductions (e.g., uniforms), and unpaid working time can all affect whether someone is actually receiving NMW.