What Changed?
From the start of the UK 2026-27 tax year (6 April 2026), the basic Personal Allowance is confirmed at £12,570 across the UK. The tax code prefix system, including emergency codes, continues with 1257L for the standard code. (gov.uk)
What Employers Need to Do
To avoid payroll disruptions, employers should:
- Prepare payroll records for each employee working on or after 6 April 2026, ensuring their tax codes are updated. (gov.uk)
- When you receive a new tax code (P9(T) or otherwise), replace earlier notifications in the record.
- For employees leaving before 6 April, retain old tax codes unless payments occur after this date—then use special codes like 0T, S0T, C0T, depending on the previous prefix. (gov.uk)
- If you operate or update Basic PAYE Tools, ensure they're ready for new tax year settings when the software release occurs. (gov.uk)
Why It Matters
Failure to update tax codes correctly can lead to under-, over-charging PAYE, complications with emergency codes, or incorrect employee take-home pay. This causes integration issues with HMRC systems and potential penalties.
Example Scenario
A small business with 20 employees receives new codes pushing many from 1250L to 1257L. Without updating payroll, from 6 April some employees would pay too little tax initially, causing liability at the end of the year or through HMRC intervention.
Actionable Steps
- Audit all employee records ahead of 6 April 2026.
- Communicate with payroll software providers about updating tax code settings.
- Train payroll, HR staff on recognising correct prefixes and emergency codes.
- Review payroll practices for new starters and leavers around the transition window.
Quick Reference Checklist
- Confirm personal allowance £12,570 applied
- Identify correct prefix (‘S’, ‘C’, etc.)
- Implement emergency code where necessary
- Ensure payroll tools include updates for 2026-27
Employers who stay ahead on these changes help ensure smooth transitions and fewer end-of-year surprises.