Key Payroll Changes Employers Should Know
Starting 6 April 2026, several changes kick in that directly affect payroll processing and employee deductions. They include:
- Updates to tax codes for all employees, including new prefixes and emergency codes. Basic Personal Allowance remains £12,570.(gov.uk)
- New Student Loan Plan 5 entering repayment, with specific repayment thresholds and rate structure. Employers will receive start notices in March 2026.(gov.uk)
- Mandatory payrolling of benefits in kind (BiKs) and expense reporting being introduced in 2027-28; employers should register voluntarily ahead of that date.(gov.uk)
- State Pension age increasing to 67 years, affecting pensionable employee categories and NIC letters.(gov.uk)
Action Items for Employers
- Update your payroll software: Basic PAYE Tools will need version 26.0 from 6 April 2026. Ensure automatic updates are enabled.(gov.uk)
- Register for voluntary payrolling of BiKs by 5 April 2026 if you wish to opt in ahead of the mandatory regime in 2027-28.(gov.uk)
- Inform staff about changes: those reaching State Pension age between 6 April 1960 and 5 March 1961 will have their NI category letter updated.
- Understand student loan thresholds and default plan: In absence of a start notice, Plan 1 will apply until notice received, then default shifts to Plan 5 from 6 April.(gov.uk)
Examples & Implications
- A small firm with 8 employees using Basic PAYE Tools must upgrade their software by tax-year start, or risk using outdated codes or incorrect student loan deductions.
- An employer providing non-cash rewards (like vouchers) must account for tax & Class 1A NICs and decide whether to adopt a taxed award scheme—all reporting rules apply.(gov.uk)
- Companies hiring qualifying veterans can benefit from reduced employer NICs up to certain thresholds—relief extended to 2028.(gov.uk)
Mitigating Risks
- Conduct a payroll health-check ahead of April 2026 to catch any software incompatibilities or misconfigurations.
- Keep documentation of employees’ birth dates for pension age eligibility; double-check NI category letters post-change.
- Train payroll staff on upcoming BiKs reporting.
Takeaway
Payroll rules coming into force in April 2026 will affect tax code, student loan plans, benefit haircuts and employer record-keeping. Employers who begin adapting now—updating tools, educating staff, registering for future obligations—will find the transition smoother and less costly.