New for 2026-27
There are a number of changes to the rules and rates that will affect payroll for 2026-27 and this guide provides details of some of them. Payroll Manager is automatically updated to include each of these changes. We would recommend that you read the latest editions of the HMRC Employer Bulletin (www.hmrc.gov.uk/payerti/forms-updates/employer-bulletin/index.htm ) which cover many of these items in greater detail. Please also see the GOV.UK document Rates and thresholds for employers 2026-27 which gives details of National Insurance rates and thresholds, minimum wage rates, etc.
- Employee Tax codes for tax year 2026-27.
- Income tax rates and thresholds in England, Northern Ireland, Wales and Scotland from 6 April 2026.
- National Insurance Contributions.
- National Minimum wage increases.
- New Statutory Sick Pay (SSP) rules and rates from 6 April 2026.
- Statutory Parenting Pay rates and employer reclaim percentages from 6 April 2026.
- Student loan rates and thresholds – Plan 1, Plan 2, Plan 4 (Scotland), Plan 5 (New from April 2026) and Postgraduate loans.
- Employment Allowance.
- Auto Enrolment Pensions – Qualifying Earnings thresholds.
It is possible to view (and print, if you wish) all of the relevant rates and thresholds by clicking ‘Analysis‘ then ‘Tax & NIC rates‘ from the main menu of the Payroll Manager software. The ‘Layout‘ selector at the top of the report allows you to select the relevant year.
1. Employee Tax codes for tax year 2026-27
HMRC have announced that there will be NO uplifts of tax codes for tax year 2026-27. The ‘standard/emergency’ tax code for 2026-27 remains at 1257L (S1257L in Scotland, C1257L in Wales).
The HMRC help sheet www.hmrc.gov.uk/helpsheets/p9x.pdf gives further guidance on Tax Codes.
2. Income tax rates and thresholds in England, Northern Ireland, Wales and Scotland from 6 April 2026
England, Wales and Northern Ireland
The standard employee personal allowance for the 2026 to 2027 tax year is:
- £242 per week
- £1,048 per month
- £12,570 per year
Tax rates for England, Wales and Northern Ireland remain frozen at 2025-26 levels. The rates for 2026-27 are as follows:
Tax rates above Personal Allowance:
| Basic tax rate | 20% | Up to £37,700 |
| Higher tax rate | 40% | From £37,701 to £125,140 |
| Additional tax rate | 45% | Above £125,140 |
Scotland
The standard employee personal allowance for the 2026 to 2027 tax year is:
- £242 per week
- £1,048 per month
- £12,570 per year
The bands to which the various Scottish Tax rates apply have been changed slightly from 2025-26. The rates for 2026-27 are as follows:
Tax rates above Personal Allowance:
| Starter tax rate | 19% | Up to £3,967 |
| Basic tax rate | 20% | From £3,968 to £16,956 |
| Intermediate tax rate | 21% | From £16,957 to £31,092 |
| Higher tax rate | 42% | From £31,093 to £62,430 |
| Advanced tax rate | 45% | From £62,431 to £125,140 |
| Top tax rate | 48% | Above £125,140 |
A full list of tax rates and thresholds can be found at Rates and thresholds for employers 2026 to 2027 – GOV.UK (www.gov.uk)
Payroll Manager will automatically apply the correct rate / threshold for income tax according to the tax code assigned to each employee.
3. National Insurance Contributions
The rates and thresholds for the calculation of employee (primary) and employer (secondary) NIC remain unchanged from 2025-26, although the ‘Lower Earnings Limit’ (LEL) has increased slightly to £129 / week.
The table below shows the National Insurance bands for 2026-27.
| Lower Earnings Limit (LEL) | Primary Threshold (PT) | Secondary Threshold (ST) for Employer NIC | Upper Earnings Limited (UEL) | |
| Weekly | 129 | 242 | 96 | 967 |
| 2-Weekly | 258 | 484 | 193 | 1,934 |
| 4-Weekly | 516 | 967 | 385 | 3,867 |
| Monthly | 559 | 1,048 | 417 | 4,189 |
| Directors Annual | 6,708 | 12,570 | 5,000 | 50,270 |
A full list of NIC rates can be found at Rates and thresholds for employers 2026 to 2027
Payroll Manager will automatically apply the correct NIC bands and rates for each NIC category.
4. National Minimum Wage increases.
The National Minimum wage rates are increasing from April 2026. The new hourly rates, applicable from 1 April 2026 are as follows:
- Aged 21 and above (national living wage rate) – £12.71
- Aged 18 to 20 inclusive – £10.85
- Aged under 18 (but above compulsory school leaving age) – £8.00
- Apprentices in their first year – £8.00
If you have employees that are subject to these minimums you should ensure that the correct rate is being paid from April 2026 onwards. Payroll Manager has a number of features to help with this – please see Minimum Wage and National Living Wage – Moneysoft
More information can be found on the following links:
National Minimum wage and Living wage rates
ACAS guide – when minimum wage increases apply
5. New Statutory Sick Pay (SSP) rules and rates from 6 April 2026
The Employment Rights Act (2025) introduced a number of changes to the way that Statutory Sick Pay (SSP) will operate from 6 April 2026. A summary of these changes are given below:
- Employees who are absent for one single, complete day of sickness (or more) now qualify for SSP (in previous years an employee had to be sick for 4 continuous days or more to qualify for SSP).
- SSP is payable from the first complete day of sickness (in previous years the first 3 days of absence from work due to sickness were classed as ‘waiting days’ during which no SSP was payable).
- SSP is paid at a weekly rate of £123.25 OR at 80% of the employees Average Weekly Earnings (AWE), whichever is the lower. (The weekly SSP rate was £118.75 in 2025-26).
- The rule requiring that employees must be paid above the Lower Earnings Limit (LEL) in order to qualify for SSP has been abolished. This change means that more workers will now qualify to be paid SSP.
- A ‘Transitional Protection‘ policy has been introduced as a temporary measure to protect low earners against a potential drop in their level of SSP.
Payroll Manager has been fully updated to apply the new SSP rules and regulations from 6 April 2026. For more information please see the Statutory Sick Pay (SSP) from 6 April 2026 guide
6. Statutory Parenting Pay rates and employer reclaim percentages from 6 April 2026
The weekly rate of ‘Statutory Parenting Pay’ has risen from £187.18 (for tax year 2025-26) to £194.32 for tax year 2026-27. ‘Statutory Parenting Pay’ includes Statutory Maternity, Paternity, Adoption, Shared Parental, Parental Bereavement and Neonatal Care Pay.
Employers can currently reclaim 92% of employees Statutory Parenting Pay. If a business has paid £45,000 or less in Class 1 National Insurance (ignoring any reductions like Employment Allowance) in the last complete tax year they also qualify for Small Employers Relief, and reclaim 100% of the Statutory Payment, plus an additional amount of ‘compensation’. From 6 April 2025, the rate of compensation will increase from 8.5% to 9%. Employers who qualify for Small Employers Relief will therefore be able to reclaim a total of 109% from HMRC.
See the HMRC publication Rates and Thresholds for 2026-27 for more information.
Payroll Manager will automatically apply the correct rate of statutory parenting pay.
7. Student loan rates and thresholds – Plan 1, Plan 2, Plan 4 (Scotland), Plan 5 (New from April 2026) and Postgraduate loans.
From 6 April 2026:
- The threshold at which borrowers repay Student Loan Plan Type 1 loans rises from £26,065 to £26,900 per year – Type 1 loans are those issued to students before 2012. The rate remains at 9%.
- The threshold for Student Loan Plan Type 2 loans (issued after 2012) rises from £28,470 to £29,385 per year. The rate remains at 9%.
- The threshold for Student Loan Plan Type 4 loans (Scotland) rises from £32,745 to £33,795 per year. The rate remains at 9%.
- The new (from April 2026) Student Loan plan Type 5 is introduced, with a threshold of £25,000 per year and a repayment rate of 9%.
- The threshold for Postgraduate Loans (PGL), remains at £21,000 per year, and the rate remains at 6%.
Payroll Manager will automatically apply the correct student loan repayment threshold and will include the correct plan type in the RTI details sent to HMRC.
Please see our guide on Student Loan Deductions for details of how to process student loan repayments in the software.
For more information please refer to the HMRC guide on Repaying your student loan
8. Employment Allowance
The Employment Allowance (EA) will be maintained at £10,500 in 2026-27 (the same level as 2025-26).
See our guide to the Employment Allowance for more details of how Payroll Manager handles the Employment Allowance.
9. Auto Enrolment Pensions – Qualifying Earnings thresholds
The 2026-27 Auto Enrolment Qualifying Earnings thresholds remain unchanged from the 2025-26 levels.
- The Lower level of Qualifying Earnings remains at £120 per week / £520 per month for 2026-27
- The Upper level of Qualifying Earnings remains at £967 per week / £4,189 per month for 2026-27
- The ‘trigger point’ (where employees need to be automatically enrolled) remains at £10,000 per year.
The minimum contribution percentages relating to Automatic Enrolment pension schemes have not changed for 2026-27, and remain at 5% for the employee and 3% for the employer.
Payroll Manager will automatically apply these thresholds when calculating auto-enrolment pension contribution amounts .
Links
GOV.UK – Rates and Thresholds for 2026-27