Compliance

Staying Compliant: UK Employers Navigating PAYE and National Insurance Changes in 2026

UK employers face several key compliance shifts in the 2026–27 tax year, including updates to benefits in kind, student loan plans, and international contributions.

By NomadicTax Research Team • 5-8 min read • February 25, 2026

## Overview of 2026 PAYE and National Insurance Changes From **6 April 2026**, several changes affect UK employers’ payroll and compliance responsibilities ([gov.uk](https://www.gov.uk/government/publications/employer-bulletin-february-2026/february-2026-issue-of-the-employer-bulletin?utm_source=openai)): - **Mandatory payrolling of most Benefits in Kind (BiKs)** and expenses will begin between **2027–28**, but interim guidance and technical specs are being released now. Employers using free payroll tools must ensure they upgrade to version **26.0** by the time the new tax year starts ([gov.uk](https://www.gov.uk/government/publications/employer-bulletin-february-2026/february-2026-issue-of-the-employer-bulletin?utm_source=openai)). - **Student Loan Plan 5** launches. Employers will begin receiving start notices in **March 2026**, and from **6 April 2026**, new borrowers will repay under Plan 5. Thresholds vary by plan: e.g., £25,000 for Plan 5; rates remain at 9% for Plans 1, 2, 4, and 5, 6% for postgraduate loans ([gov.uk](https://www.gov.uk/government/publications/employer-bulletin-february-2026/february-2026-issue-of-the-employer-bulletin?utm_source=openai)). - **Voluntary National Insurance contributions abroad**: individuals will no longer be able to pay **voluntary Class 2 NICs from overseas** for tax years **2026–27 onward**. New Class 3 applications will be limited to those with **10 continuous years of UK residency or NICs qualification** abroad. This affects expatriates and international workers ([gov.uk](https://www.gov.uk/government/publications/employer-bulletin-february-2026/february-2026-issue-of-the-employer-bulletin?utm_source=openai)). - Changes to **tax codes** related to **winter payments**: income over £35,000 will trigger adjustments to recover winter fuel/heating payments via PAYE from tax codes—employers will need to process mid-year category letter updates for employees reaching State Pension age between **6 April 1960–5 March 1961** ([gov.uk](https://www.gov.uk/government/publications/employer-bulletin-february-2026/february-2026-issue-of-the-employer-bulletin?utm_source=openai)). ## What Employers Should Do Now - Make sure payroll software tools are **updated to version 26.0** by 6 April 2026 to accurately apply new rules on BiKs and student loans. Older versions may miscalculate tax withheld or misassign student loan plan labels. - Audit employees who may reach the State Pension age in the financial year 2026–27, update their National Insurance category letters accordingly, and communicate well in advance—especially for those born between April 1960 and March 1961 ([gov.uk](https://www.gov.uk/government/publications/employer-bulletin-february-2026/february-2026-issue-of-the-employer-bulletin?utm_source=openai)). - For staff abroad expecting to pay voluntary NICs, assess eligibility for end of Class 2 and transition to Class 3 or alternative pension arrangements. Check continuity of contributions and record keeping. - Monitor tax codes: preparations should include systems to auto-adjust codes in early April 2026 for recovery of winter payments without needing individual action from employees ([gov.uk](https://www.gov.uk/government/publications/employer-bulletin-february-2026/february-2026-issue-of-the-employer-bulletin?utm_source=openai)). ## Examples - **Case A – Employee on BiK**: Sarah’s employer gives non-cash awards. Under the updated guidance, these must begin to be payrolled (if meeting criteria) from 2027–28—employers should already account for this change in future budgeting and compliance planning. - **Case B – Student loan plan assignment**: Tom signs his first student loan agreement in June 2026. Since he’s a new borrower, he’ll fall under **Plan 5**. His employer will get notification in March 2026 to start deductions from April at the correct threshold and rate. - **Case C – Volunteer abroad**: Emily, a British expat, planned to pay Class 2 NICs but will now need to assess Class 3 eligibility or alternative pensions after 6 April. She must verify 10 years continuous residence or contributions to qualify under new rules. ## Why This Matters for Businesses - Non-compliance could lead to penalties or incorrect tax deductions. - Employers with international workforce likely to be hit hardest by NIC changes abroad. - Up-to-date software and clear processes are essential for accurate payroll runs and avoiding mis-classifications. UK employers will need to prepare ahead of the 6 April 2026 start date. Early action now helps avoid costly errors later in the financial year.