Payroll changes for 2026/27

From 6 April, the state pension age will increase from 66 to 67 years. Sounds rather straightforward but it’s far from it. The change is being phased in two years, so if you have employees born between 6 April 1960 and 5 March 1961, they will reach state pension age when they are between 66 and 67 years old.

Use the state pension age calculator to find the relevant date for your employees so you can update their NI category letter in time.

Statutory sick pay. From 6 April 2026, all employees regardless of their earnings are eligible for statutory sick pay (SSP) from the first working day of sickness as the requirement to serve waiting days is abolished. Employees will no longer need to be sick for at least four consecutive days to qualify, even if the employee is only sick for one day they’ll be entitled to SSP.

The amount of SSP payable from 6 April 2026 is set at the lower of 80% of the employee’s average weekly earnings and £123.25 per week.

Small employers’ relief. Small employers’ relief is available to businesses with a Class 1 NI bill of £45,000 or less (before the employment allowance) in the previous tax year.

Businesses that qualify can currently reclaim 108.5% of employees’ statutory parental payments such as statutory maternity and paternity pay, etc. For 2026/27 this will increase to 109% to compensate for Class 1 NI.

New student loan type. From 6 April 2026 Plan 5 student loans will be introduced into repayment for the first time. Until 5 April 2026, where employers are unsure which plan to use, they should use Plan 1 until a start notice is received. However, from 6 April 2026 Plan 5 will become the default.