Key Payroll Changes for 2026/27

The new tax year brings several updates to payroll and employment costs that employers should be aware of. While many of the changes are relatively small, it’s important to ensure your payroll systems are updated correctly from April 2026.

This is a summary of the key updates affecting employers.

Statutory Sick Pay (SSP)

There are significant changes to Statutory Sick Pay from April 2026 , which are covered in a separate article.

Lower Earnings Limit (LEL)

The Lower Earnings Limit (LEL) has increased slightly for the 2026/27 tax year.

In practice, this change will not impact most employers significantly, as employees earning above this level are already well within the range where National Insurance calculations apply. However, payroll software should still be updated to reflect the new threshold.

Small Employers’ Relief

For businesses that qualify for Small Employers’ Relief (SER) when reclaiming certain parental statutory payments, the compensation rate has increased.

• 2025/26 rate: 108.5%

• 2026/27 rate: 109%

This means eligible small employers can reclaim 109% of the following payments from HMRC.  Eligible employers are those who paid less than £45,000 in combined employer and employee Class 1 National Insurance in the last full tax year (ignoring reductions such as the Employment Allowance).

• Statutory Maternity Pay

• Statutory Paternity Pay

• Statutory Adoption Pay

• Shared Parental Pay

• Statutory Parental Bereavement Pay

• Statutory Neonatal Care Pay

Employers who do not qualify for Small Employers’ Relief continue to be able to reclaim 92% of the above payments.

New Student Loan Plan 5

A new Student Loan Plan 5 has been introduced.

Key details:

• Repayment threshold: £25,000

• Repayment rate: 9% of earnings above the threshold

Employers should ensure payroll systems are able to identify and process deductions under Plan 5 when they are notified by HMRC through employee starter information or coding notices.

Employment Allowance

The Employment Allowance remains at £10,500 for the 2026/27 tax year.

However, it’s important to remember that this allowance must be claimed each tax year, it does not automatically apply. If you process your own payroll, please remember to submit a claim through your Employer Payment Summary (EPS) at the start of the new tax year.

National Minimum Wage Increases

National Minimum Wage hourly rates increase every year on 1 April. Employers should ensure pay rates and employee dates of birth are up to date to remain compliant.

Rate	April 2025	April 2026
Age 21 and over	£12.21	£12.71
Age 18 to 20	£10.00	£10.85
Under 18	£7.55	£8.00
Apprentice	£7.55	£8.00

Apprentice Pay Rules

Apprentices are entitled to the apprentice rate if they are:

• Under 19, or

• Aged 19 or over and in the first year of their apprenticeship

After the first year, apprentices aged 19 or over must be paid at least the appropriate minimum wage for their age group.

Final Thoughts

While some of these changes are relatively minor, ensuring payroll is updated correctly from April will help you remain compliant and avoid potential issues with HMRC.

If you need help updating your payroll, claiming Employment Allowance, or understanding how the new student loan plan affects your employees, it’s always worth speaking to Anne, our payroll manager, who will be glad to help.