🇬🇧 United Kingdom: payroll law changes

6 tracked changes · Europe · sources last checked 1 October 2026

Statutory and legislative payroll changes in United Kingdom, each linked to the page it was checked against. For information only, not legal or tax advice: confirm details with the source before acting. See the terms.

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Income tax and NI thresholds frozen until April 2031

Confirmed for 2026/27

The Personal Allowance (£12,570) and higher-rate threshold (£50,270) are maintained until April 2031, and the additional-rate threshold stays at £125,140. The NI primary threshold (£12,570), upper earnings limit (£50,270) and employer secondary threshold (£5,000) are also held until April 2031.

For the employer

No new threshold changes for 2026/27 - existing PAYE and NI tables carry over.
Employer NI continues to apply above the £5,000 secondary threshold.

For the employee

A pay rise this year pushes proportionally more income into higher tax and NI bands than it would if thresholds moved with inflation - this is the continuing "fiscal drag" effect of the freeze.

Source: Deloitte Tax Scape - Income tax and NI thresholds frozen · Last verified 1 October 2026

National Living Wage rises to £12.71 an hour

Effective 1 Apr 2026

From April 2026 the National Living Wage (age 21+) is £12.71 an hour. The 18-20 rate is £10.85, and the under-18 and apprentice rates are £8.

For the employer

Raise any worker paid below the new April 2026 rate for their age band.

For the employee

Workers on the National Living Wage or National Minimum Wage get an automatic increase from the April 2026 pay run.

Source: GOV.UK - National Minimum Wage and National Living Wage rates · Last verified 1 October 2026

Day-one statutory sick pay and paternity leave; Fair Work Agency established

Effective April 2026

The Employment Rights Act 2025 removes the previous 3-day waiting period for Statutory Sick Pay, making it payable from the first day of absence, and abolishes the Lower Earnings Limit so all employees qualify regardless of how little they earn. Paternity leave also becomes a day-one right. The new Fair Work Agency, consolidating several existing enforcement bodies, is established from the same date.

For the employer

Update sick pay policies and payroll rules to pay SSP from day one, not day four, and remove any earnings-based exclusion for low earners.
Confirm paternity leave requests are no longer refused for lack of qualifying service.

For the employee

SSP is now payable from the very first day of illness, and low earners who previously fell below the Lower Earnings Limit now qualify.
Paternity leave can be taken from day one of employment, with no minimum service requirement.

Source: Pinsent Masons - Employment Rights Act implementation timeline · Last verified 1 October 2026

SSP and family statutory pay rates uprated

Effective April 2026

The weekly rate of Statutory Sick Pay rises from £118.75 to £123.25. Statutory maternity, paternity, shared parental, adoption, parental bereavement and neonatal care pay rise from £187.18 to £194.32 a week.

For the employer

Update payroll software with the new SSP and family statutory pay rates for April 2026.

For the employee

Anyone on statutory sick pay or statutory family pay from April 2026 receives the higher weekly rate automatically.

Source: Acuity Law - Updated statutory sick pay and parental pay rates · Last verified 1 October 2026

Unfair dismissal qualifying period cut to six months

Effective January 2027 Upcoming

Under the Employment Rights Act timetable, the unfair dismissal qualifying period is reduced to six months, and the cap on the compensatory award is removed, from January 2027. The reduced qualifying period applies to dismissals taking place from that date.

For the employer

Review probationary and early-termination processes now - a much larger share of the workforce will gain unfair dismissal rights after six months' service.
Note the date applies to when a dismissal happens, not when someone started - an employee hired in 2026 could already be covered by January 2027.

For the employee

Unfair dismissal protection will apply after six months of service for dismissals from January 2027.

Source: Davidson Morris - Employment Rights Act timeline · Last verified 1 October 2026

Mandatory payrolling of benefits in kind, phased from April 2027

Phase 1: 6 Apr 2027 Upcoming

Payrolling of benefits in kind becomes mandatory in phases. From 6 April 2027 the most common benefits - company cars, car and van fuel, vans and medical benefit - must be reported and taxed in real time through RTI payroll software. From 6 April 2028 most remaining benefits in kind are mandated, except employer-provided loans and accommodation.

For the employer

Do not treat benefits-in-kind payrolling as mandatory yet - continue filing P11D/P11D(b) as normal until Phase 1 takes effect in April 2027.
If providing company cars, fuel, vans, or medical benefits, start planning payroll software changes ahead of the April 2027 Phase 1 date.

For the employee

None yet - benefit-in-kind tax continues to be handled via the annual P11D process until the phased rollout begins.

Source: GOV.UK - Mandatory payrolling of benefits in kind from April 2027 · Last verified 1 October 2026

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