New Tax Year 2026/27: Payroll Changes Employers Need To Know

Statutory Sick Pay: Day One, 80% Earnings And Overlaps

From 6 April 2026, Statutory Sick Pay (SSP) moves away from a simple flat-rate and eligibility-only model to a more complex structure.

Employers will need to handle three parallel SSP positions for a period:

• New sickness absences from 6 April 2026 will be paid at the lower of 80% of average weekly earnings (AWE) or a weekly cap of £123.25, with SSP now payable from day one and no Lower Earnings Limit eligibility criteria.

• Existing sickness cases crossing the changeover date may be protected on a previous higher flat rate under transitional rules.

• Payroll teams will therefore be running flat-rate SSP, 80% of AWE calculations and transitional protections at the same time, increasing the scope for system and process errors.

Our SSP Shake Up article covers this in more depth

National Minimum Wage: April 2026 Rates And Risk Areas

From April 2026, National Minimum Wage (NMW) and National Living Wage (NLW) rates increase again, with particular emphasis on 18–20 year olds and younger workers. Getting the basics wrong exposes employers to arrears, penalties and reputational damage.

Headline hourly rates from April 2026 are:

• National Living Wage (21 and over): £12.71 per hour.

• 18–20 year old rate: £10.85 per hour.

• 16–17 year old and apprentice rates: £8.00 per hour.

• Accommodation offset: £11.10 per day.

Beyond the headline rates, employers still need to manage more nuanced risks such as unpaid working time, salary sacrifice, uniform deductions and how pay is averaged over a 52‑week reference period.

For a deeper look at how 52‑week reference periods really work in practice – and how small timing errors can trigger National Minimum Wage underpayments – see our article ‘When is 52 weeks not a year?’.

The New Fair Work Agency: A Sharper Enforcement Landscape

From April 2026, a new Fair Work Agency (FWA) is scheduled to go live, consolidating several existing enforcement bodies. Over time, its remit will bring together enforcement of NMW, agency worker rules, labour market abuses and wider employment rights

Key features of the Fair Work Agency include:

• A single point of contact for workers to raise concerns and for employers to seek guidance on workplace rights.

• Powers to carry out workplace inspections, issue civil penalties for underpayment of wages and holiday, and bring legal proceedings on behalf of workers.

• A strong focus on NMW, holiday pay and SSP compliance, meaning payroll data and processes are likely to sit at the centre of any investigation.

For employers, this makes proactive payroll compliance more important than ever, as issues are more likely to be spotted, joined up and escalated.

Tax And NIC Thresholds: Frozen But Still Important

While there are no dramatic shifts in income tax thresholds or personal allowance for 2026/27, the freeze itself continues to widen the gap between gross and take‑home pay. Employers may find staff queries increasing, even where gross salaries have risen.

Key 2026/27 points for payroll include:

• The standard personal allowance remains at £12,570, with the basic, higher and additional rate bands unchanged, continuing the “fiscal drag” effect.

• Class 1 National Insurance thresholds such as the primary threshold (£242 per week / £1,048 per month) and a new lower earnings limit (£129 per week) remain in place for payroll calculations and benefit entitlement tests.

Even where statutory figures stay static, software settings, starter checklists, tax code updates and employee communications all need reviewing at the start of the tax year.

Practical Actions For Employers This April

The combination of SSP reform, NMW increases and a tougher enforcement environment makes 2026/27 a year where payroll governance deserves board‑level attention.

A few practical steps will help reduce risk:

• Review payroll software configuration for SSP, including AWE calculations, transitional protections and day‑one entitlement, and ensure HR understands the new rules.

• Check all NMW/NLW rates, particularly for younger workers, apprentices and roles affected by uniform or equipment deductions, and revisit the 52‑week averaging approach.

• Audit time‑keeping, holiday pay and overtime practices ahead of the Fair Work Agency becoming operational, so any issues are addressed before an inspector does.

• Confirm PAYE and NIC thresholds remain correct, and prepare clear employee‑facing communications explaining why net pay may feel tighter even as headline pay rises.

FinanceBox can support employers with audits, configuration reviews and ongoing outsourced payroll to ensure that 2026/27’s new rules are implemented accurately and efficiently.