Payroll regulations in the UK: Changes you need to know

Every April brings payroll regulation changes, but UK payroll is about far more than updating tax tables once a year. HR and payroll teams now need to manage changing National Insurance thresholds, minimum wage increases, student loan plans, real-time reporting requirements, and evolving employment legislation. 

It gets even harder when they have to do it across multiple systems and workflows. After all, 68% of finance teams and 53% of HR teams use at least seven different tools per month to perform their duties.

It's no surprise, then, that payroll processing is the single most time-consuming administrative task for HR teams, with 36% ranking it as their biggest burden.

Modern workforce platforms like Rippling simplify these annual changes by bringing HR, payroll, time tracking, and IT together on a unified data model. Plus, Rippling applies HMRC updates automatically, saving your team from regularly double-checking to ensure compliance.

In this guide, we'll explain every major payroll change for 2026/27, what you need to do to stay compliant, and how modern payroll software can reduce manual administration and the risk of errors.

Key takeaways

• UK payroll compliance in 2026/27 requires updates to National Insurance, minimum wage, Statutory Sick Pay, student loan deductions, and payroll reporting.

• Statutory Sick Pay is now a day-one right for all employees, with no waiting days and no minimum earnings test.

• Employers should prepare now for the next wave of Employment Rights Act changes from January 2027, and for mandatory payrolling of benefits from April 2027.

• Connected payroll software that automatically applies HMRC updates can reduce manual administration and help minimise compliance risk.

The key changes you need to know

If you're managing payroll in the 2026/27 tax year, you'll need to be thoroughly familiar with the following updates to payroll rules. Each of these will require you to update your systems so contributions are calculated correctly and comply with payroll legislation. One change you don't need to action yet: mandatory payrolling of benefits has slipped to April 2027. More on that below.

National Insurance

Most NI thresholds and rates are frozen for 2026/27. The one that moves is the Lower Earnings Limit (LEL), which has increased to £129 per week. Employees need to earn at least this amount for their earnings to count towards NI records and benefits like the State Pension. The full 2026/27 table is further down.

National Minimum Wage

The National Minimum Wage has increased to £12.71 per hour for those aged 21 and over, £10.85 for those aged 18 to 20, and £8.00 for under-18s and apprentices.

In addition, the accommodation offset is increasing to £11.10 per day for employers who provide housing.

Read the official minimum wage update here.

Statutory Sick Pay

From 6 April 2026, Statutory Sick Pay (SSP) is payable from the first day of sickness rather than the fourth, and the minimum earnings test has gone. Every employee qualifies, whatever they earn. The weekly rate is £123.25, or 80% of average weekly earnings if that is lower. This is the biggest single change to payroll in 2026, and it is covered in full below.

Student loan deductions

All student loan thresholds have been updated, and Plan 5 deductions start for the first time in 2026/27. Plan 5 covers English borrowers who started courses from August 2023, and its £25,000 repayment threshold is the lowest of any undergraduate plan, so deductions start earlier for affected employees. Plan 5 is also the new default plan type where an employee doesn't know which plan they're on.

Payroll teams will also receive new SL1 notices from HMRC. Assign each employee to the correct plan, because applying the wrong one means incorrect deductions. Because repayment plans differ between employees, payroll software like Rippling that automatically applies HMRC notices helps reduce deduction errors.

Read the official student loan update here.

The 2026/27 UK payroll dates you need to know

Here are the 2026/27 dates to put in your payroll calendar:

A closer look at NI and PAYE system changes

From 6 April 2026, you’ll need to update your payroll settings with the latest NI thresholds and rates for the new tax year. This is the usual April reset, but it’s worth double-checking everything before your first pay run to avoid any issues.

NI payment thresholds (from 1 April 2026)

*Data from the UK government, April 2026

National Insurance contributions (from 1 April 2026)

*Data from the UK government, April 2026

The Employment Allowance stays at £10,500 for 2026/27. With the Secondary Threshold frozen at £96 a week, many smaller employers are relying on it to offset a bigger employer NI bill, so check your claim is set up before the first pay run.

Rippling automatically applies HMRC updates across payroll while using a unified employee record that synchronises changes across HR, payroll, benefits, and time tracking. That reduces the risk of payroll calculations becoming inconsistent across different systems.

Plus, Rippling AI allows payroll and HR teams to use natural-language prompts to generate insights about their workforce, payroll reports, and potential compliance issues without manually building reports.

The latest minimum wage requirements for UK businesses

From 1 April 2026, you'll need to pay all your staff at or above the National Minimum Wage. This will need to be updated across contracts and payroll systems.

National minimum wage rates (from 1 April 2026)

*Data from the UK government, April 2026

These are the rates that need to be applied from the first pay reference period starting on or after 1 April. It's also a good idea to communicate such changes to your employees in advance so they know what to expect.

Additionally, the Personal Allowance is currently frozen at £12,570, and it should remain there until at least April 2031. This means that anything an employee earns under £12,570 won’t be taxed. This shouldn’t be confused with the £1,000 trading allowance, which only applies to those making a small side income. 

Payroll platforms like Rippling that automatically update statutory pay rates reduce the risk of employees being underpaid or paying tax they shouldn’t after annual rate changes.

Statutory Sick Pay is now a day-one right

The Employment Rights Act 2025 rewrote the rules on Statutory Sick Pay from 6 April 2026, and the changes hit payroll harder than any other 2026 reform. There are three things to update:

• No more waiting days: SSP is payable from the first qualifying day of sickness, not the fourth.

• No minimum earnings test: The Lower Earnings Limit no longer decides who qualifies. Every employee is eligible, including part-time and low-paid staff who previously missed out.

• A new rate calculation: SSP is £123.25 a week, or 80% of the employee's average weekly earnings, whichever is lower. The 80% figure is what stops low earners receiving more in sick pay than they would have earned.

So if an employee on £120 a week is off sick for three days, you now pay SSP for those three days at 80% of their earnings, where before they would have received nothing. Multiply that across a workforce with a lot of part-time staff and it's a real cost line, not a rounding error.

Your payroll system needs to handle the new rate calculation per employee and drop the waiting-day logic. Check that it's done both before your first April pay run, and that absence data is flowing into payroll cleanly. That's where a unified employee record earns its keep: when time and attendance, HR, and payroll share one record, a day-one absence triggers the right SSP calculation without anyone re-keying it.

Mandatory payrolling of benefits has been delayed to 2027

Benefits in kind (BiKs), such as company cars or private medical insurance, are moving to real-time reporting through payroll. This means benefits will be taxed through payroll each pay cycle rather than reported annually on P11D forms. The mandatory rollout has been pushed back to April 2027 to give employers and software providers more time to prepare.

The current process, including P11D reporting, remains in place for 2026/27, but payroll teams should start preparing now for the shift. Organisations already using integrated payroll platforms will generally find the transition easier because benefits data already sits within payroll.

The new Fair Work Agency (FWA)

The Fair Work Agency (FWA) launched on 7 April 2026 as the single enforcement body for employment rights. Its job is to tighten enforcement across areas like minimum wage, statutory pay, and holiday pay.

The FWA won't trouble employers who pay their people correctly. If you underpay, it can. It has the power to run payroll compliance audits and workplace inspections, issue civil penalties for underpayments, and take legal action against employers who fail to comply. Accurate payroll records and automated audit trails make any HMRC or FWA investigation significantly easier to get through.

What to prepare for in 2027

While 2026 brings the first wave of changes, 2027 brings the next wave of Employment Rights Act 2025 changes. The Act is already law; what's still being settled is exact commencement dates and detail for some measures. Several will directly affect payroll compliance.

Here’s what’s on the table for 2027:

Unfair dismissal after six months

From 1 January 2027, employees will be able to claim unfair dismissal after six months of service (down from two years), and the cap on compensation is being removed. New starters gain protection much sooner, so dismissal processes need to be compliant from month six, not year two.

Restrictions on "fire and rehire"

From 1 January 2027, dismissing employees for refusing a "restricted variation" to their contract (pay, hours, holiday, or pension terms) will be automatically unfair in most cases. In practice, employers won't be able to use this approach to change contracts unless very specific conditions are met.

Stronger protections for pregnancy and maternity

The Act adds safeguards to protect pregnant employees and those returning from leave against dismissal. Employers will face stricter rules and higher risk if dismissals occur during or shortly after these periods.

New rights for zero-hours workers

Employees on zero and low-hours contracts will be able to request guaranteed hours and receive compensation for cancelled or changed shifts at short notice.

Statutory bereavement leave

Employees will have a day-one legal right to take unpaid time off following a bereavement, including pregnancy loss.

Flexible working changes

Employers will have to give a valid business reason when rejecting a flexible working request, and explain why the refusal is reasonable.

Updated redundancy rules

Collective redundancy thresholds will be assessed differently, shifting the count from individual sites to across the whole organisation in some cases.

Mandatory gender pay gap and menopause action plans

Action plans started as voluntary in 2026 and become mandatory for employers with 250 or more employees in 2027 under the Act. Those employers will need to formally document and report how they are addressing gender pay gaps and supporting employees through the menopause.

Why connected payroll systems matter

Every year brings new tax thresholds, National Insurance updates, minimum wage increases, and reporting requirements that all need to be reflected accurately in payroll.

If you’re also trying to manage all these changes manually across disconnected HR, payroll and finance systems, the task gets harder and more time-consuming. Rippling's research found that 45% of teams need more than three separate tools just to update someone's role, pay, or benefits.

That manual work quickly adds up. Rippling research also discovered that most HR and finance teams using traditional payroll systems spend more than a full working day running payroll each cycle and another day approving expenses.

Rippling takes the manual work off your plate. Its unified data model means payroll, HR, benefits, time tracking and employee records all share the same employee information. When a pay rate, role, or tax setting changes, every connected workflow updates automatically. And with Rippling AI, payroll teams can quickly answer questions, such as "Who is below the new minimum wage?", "Which employees are on Plan 5?", or "Which benefits will be affected by mandatory payrolling?" without manually exporting or reconciling data across multiple systems.

That all saves some serious time. Rippling customers can complete payroll, including reviewing, approving, and syncing hours, expenses, commissions, and benefits deductions, in 5 to 30 minutes.

Book a demo today to see how Rippling can help you navigate changing payroll regulations without slowing your team down.

FAQs

What is the UK's minimum wage in 2026?

As of 1 April 2026, the minimum wage in the UK is £12.71 per hour for those aged 21 and over. For those aged 18 to 20 it's £10.85, and for under-18s and apprentices it's £8.00. That's below the voluntary Real Living Wage, which for 2025/26 is £14.80 in London and £13.45 in the rest of the UK.

What is the Statutory Sick Pay rate for 2026/27?

SSP is £123.25 a week, or 80% of the employee's average weekly earnings if that's lower. From 6 April 2026 it's payable from the first day of sickness, and there's no minimum earnings requirement to qualify.

What is Plan 5 for student loans?

Plan 5 is the repayment plan for people who started courses in England from August 2023 onwards. They repay 9% (the same as other plans) on anything they earn over £25,000. Those who studied in Scotland are on Plan 4, where repayments start over £33,795.

Do I still need to do P11D forms?

Yes. You’ll still need to submit P11D forms for the 2026/27 tax year, with the deadline in July 2027. Mandatory payrolling of benefits starts from April 2027, so P11Ds will no longer be required for the 2027/28 tax year onwards.

Are the changes the same in Scotland?

Mostly, yes. Payroll changes, like those to NI, SSP, and minimum wage, apply across the UK. However, income tax is set separately in Scotland, so take-home pay may vary.