Statutory Alerts

Mar 24, 2026 5 min read

United Kingdom: Payroll Changes – Tax Year 2026/2027

Name: Mercans HR Blizz
Brand: Mercans
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The following updates outline the key UK payroll-related changes for the 2026/27 tax year, including rates, thresholds, and legislative updates impacting payroll calculations and reporting

A. Tax Thresholds, Rates and Codes

The amount of Income Tax deducted from employees depends on their tax code and the portion of taxable income above the Personal Allowance.

A.1 Personal Allowance (2026/27)

Frequency	Amount
Weekly	£242
Monthly	£1,048
Annual	£12,570

If income exceeds £100,000, the Personal Allowance is reduced by £1 for every £2 above this threshold. The allowance becomes nil at £125,140.

A.2 PAYE Tax Rates – England and Northern Ireland

Tax Rate	Rate	Annual Earnings (above PAYE threshold)
Basic	20%	Up to £37,700
Higher	40%	£37,701 to £125,140
Additional	45%	Above £125,140

A. 3 PAYE Tax Rates – Scotland

Tax Rate	Rate	Annual Earnings (above PAYE threshold)
Starter	19%	Up to £3,967
Basic	20%	£3,968 to £16,956
Intermediate	21%	£16,957 to £31,092
Higher	42%	£31,093 to £62,430
Advanced tax rate	45%	From £62,431 to £125,140
Top tax rate	48%	Above £125,140

A.4 PAYE Tax Rates – Wales

Tax Rate	Rate	Annual Earnings (above PAYE threshold)
Basic	20%	Up to £37,700
Higher	40%	£37,701 to £125,140
Additional	45%	Above £125,140

A.5 Emergency Tax Codes (from 6 April 2026)

1257L W1
1257L M1
1257L X

B. Class 1 National Insurance Thresholds (2026/27)

Threshold	Weekly	Monthly	Annual
Lower Earnings Limit (LEL)	£129	£559	£6,708
Primary Threshold (PT)	£242	£1,048	£12,570
Secondary Threshold (ST)	£96	£417	£5,000
Freeport Upper Secondary Threshold	£481	£2,083	£25,000
Investment Zone Upper Secondary Threshold	£481	£2,083	£25,000
Upper Secondary Threshold (Under 21)	£967	£4,189	£50,270
Apprentice Upper Secondary Threshold	£967	£4,189	£50,270
Veterans Upper Secondary Threshold	£967	£4,189	£50,270
Upper Earnings Limit (UEL)	£967	£4,189	£50,270

C. Class 1 National Insurance Rates

C.1 Employee (Primary) Contributions

Thresholds	2026 to 2027	A/M/H/F/V/N	B/I/E	C/S/K	J/L/Z/D
Zero to ST	0 to 5,000	Nil	Nil	Nil	Nil
ST to LEL	5,000 to 6,708	0%	0%	Nil	0%
LEL to PT	6,708 to 12,570	0%	0%	Nil	0%
PT to FUST/IZUST	12,570 to 25,000	8%	1.85%	Nil	2%
FUST/IZUST to UEL/UST/ AUST/VUST	25,000 to 50,270	8%	1.85%	Nil	2%
Above UEL/UST/ AUST/VUST	Above 50,270	2%	2%	Nil	2%

C.2 Employer (Secondary) Contributions

Thresholds	2026 to 2027	A/B/C/J	H/M/V/Z	F/I/S/L	D/E/K/N
Zero to ST	0 to 5,000	Nil	Nil	Nil	NIL
ST to LEL	5,000 to 6,708	15.0%	0%	0%	0%
LEL to PT	6,708 to 12,570	15.0%	0%	0%	0%
PT to FUST/IZUST	12,570 to 25,000	15.0%	0%	0%	0%
FUST/IZUST to UEL/UST/AUST/VUST	25,000 to 50,270	15.0%	0%	15.0%	15.0%
Above UEL/UST/AUST/VUST	Above 50,270	15.0%	15.0%	15.0%	15.0%

The National Insurance Class 1A rate for 2026 to 2027 is 15% for the following:

expenses and benefits
termination awards and sporting testimonial payments

The National Insurance Class 1B rate on PAYE Settlement reports for 2026 to 2027 is 15%.

D. National Minimum Wage (from 1 April 2026)

Category	Amount
Age 21+	£12.71
Age 18–20	£10.85
Under 18	£8.00
Apprentice	£8.00
Accommodation offset (daily)	£11.10

E. Statutory Sick Pay

Details	Rates and Conditions (2026/27)
SSP weekly rate	£123.25
Waiting days	Removed – SSP payable from day 1
Eligibility	Extended below LEL
Low earners rule	80% of AWE if lower than SSP rate

Unrounded daily rates based on the qualifying days

Days to Pay ↓ / Qualifying Days →	1 Day	2	3 Days	4 Days	5 Days	6 Days	7 Days
1	123.25	Days	41.09	30.82	24.65	20.55	17.61
2	—	61.63	82.17	61.63	49.30	41.09	35.22
3	—	123.25	123.25	92.44	73.95	61.63	52.83
4	—	—	—	123.25	98.60	82.17	70.43
5	—	—	—	—	123.25	102.71	88.04
6	—	—	—	—	—	123.25	105.65
7	—	—	—	—	—	—	123.25

F. Statutory parental payments

Payment type	2026/27 weekly rate	Notes
Statutory Maternity Pay – First 6 months	90% of Average Weekly Earnings (AWE)
Statutory Maternity Pay – for remaining weeks	£194.32	Or 90% of AWE if lower
Statutory Paternity Pay	£194.32	Or 90% of AWE if lower
Statutory Adoption Pay – First 6 weeks	90% of AWE
Statutory Adoption Pay – for remaining weeks	£194.32	Or 90% of AWE if lower
Shared Parental Pay	£194.32	Or 90% of AWE if lower
Parental Bereavement Pay	£194.32	Or 90% of AWE if lower
Neonatal Care Pay	£194.32	Or 90% of AWE if lower

G. Student loan deductions

Loan type	Threshold	Deduction rate 2026/27
Plan 1	£26,900	9%
Plan 2	£29,385	9%
Plan 4	£33,795	9%
Plan 5 (becomes relevant in payroll processing)	£25,000	9%
Postgraduate Loan	£21,000	6%

H. Employment Allowance

Employment Allowance allows eligible employers to reduce their annual National Insurance liability by up to the annual allowance amount.

I. Apprentice Levy Charge

Allowance or charge	Rate 2026/27
Apprenticeship Levy allowance	£15,000
Apprenticeship Levy charge	0.50%

J. Removal of Employee-Claimed Homeworking Tax Relief

From 6 April 2026, employees will no longer be able to claim tax relief directly from HMRC for additional homeworking expenses.

K. Employer Reimbursements – Tax and NIC Treatment

Employers can continue to reimburse qualifying expenses tax and NIC free, provided conditions for exemption are met.

Extended Exemptions (from 6 April 2026)

The exemption is expanded to include reimbursed costs for:

Home working equipment
Eye tests
Flu vaccination

Implementation Timeline

The above changes shall be implemented effective April 6, 2026 except those where other effective date is mentioned in the document

HMRC has clarified on 8 April 2026 that the Statutory Maternity Pay (SMP) rate is effective from 5 April 2026, while all other statutory pay like parental, sick, neonatal care pay rates referenced in this alert apply from 6 April 2026.

Glossary

NIC Category Letter	Description
A	Standard category (employees aged 21 to State Pension age)
B	Married women and widows entitled to pay reduced National Insurance
C	Employees over State Pension age
D	Deferred National Insurance (Investment Zone employee)
E	Married women and widows entitled to reduced NI (Investment Zone employee)
F	Standard category (Freeport employee eligible for NIC relief)
H	Apprentice under age 25
I	Married women and widows entitled to reduced NI (Freeport employee)
J	Deferred National Insurance (employee has another job where NI is paid)
K	Employees over State Pension age (Investment Zone employee)
L	Deferred National Insurance (Freeport employee)
M	Employees under age 21
N	Standard category (Investment Zone employee eligible for NIC relief)
S	Employees over State Pension age (Freeport employee)
V	Veteran (eligible for employer NIC relief)
Z	Deferred National Insurance (employee under age 21)

Please contact your Mercans’ services delivery team for any additional information regarding the implications of the above change.

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UK Payroll Calculation Updates – 2026/27

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