Compliance
UK Employers & Payroll-Heavy Changes From April: From Student Loan Plan-5 to Moving PAYE Tools Forward
With tax year 2026-27 beginning, several employer and payroll rules in the UK are changing—from new student loan repayment plans to switching off old payroll tools.
By NomadicTax Research Team • 5-8 min read • March 22, 2026
## Overview
Employers in the UK are facing a number of compliance and operational changes effective from **6 April 2026** as announced in the February 2026 *Employer Bulletin* by HMRC. These affect payroll software, student loan deductions, benefits reporting, and more. ([gov.uk](https://www.gov.uk/government/publications/employer-bulletin-february-2026/february-2026-issue-of-the-employer-bulletin?utm_source=openai))
## Key Compliance Changes
- **New Student Loan Plan-5 starts**: Employees under Plan-5 loans (new plan type) will begin deductions from 6 April 2026. Employers will receive *start notices* from HMRC in March. If unsure, employers should default to Plan 1 until a notice is received, but that default changes to Plan 5 starting the new tax year. ([gov.uk](https://www.gov.uk/government/publications/employer-bulletin-february-2026/february-2026-issue-of-the-employer-bulletin?utm_source=openai))
- **Basic PAYE Tools updates**: Employers with under 10 employees using *Basic PAYE Tools* must upgrade to version 26.0 from 6 April 2026. New users registering for PAYE must use the updated system. Also align automatic updates. ([gov.uk](https://www.gov.uk/government/publications/employer-bulletin-february-2026/february-2026-issue-of-the-employer-bulletin?utm_source=openai))
- **PAYE tax codes for winter payment recovery**: From April 2026, HMRC will automatically adjust tax codes for individuals who received Winter Fuel Payment or Pension Age Winter Heating Payment and had total income over £35,000. Employers should expect updated codes in early April. ([gov.uk](https://www.gov.uk/government/publications/employer-bulletin-february-2026/february-2026-issue-of-the-employer-bulletin?utm_source=openai))
- **Voluntary NI contributions abroad**: Individuals previously paying **Class 2 NICs** from abroad will see this option removed starting the tax year 2026-27. New applications for **Class 3 NICs** for periods abroad will require at least **10 years of continuous residence or 10 qualifying years**. Ensure employees working abroad or with foreign ties are aware. ([gov.uk](https://www.gov.uk/government/publications/employer-bulletin-february-2026/february-2026-issue-of-the-employer-bulletin?utm_source=openai))
## Practical Examples for Employers
1. *Small business with 8 employees* uses an old version of BPT. They should install version 26.0 before 6 April to avoid payroll miscalculations.
2. *Employee goes on to get a student loan under Plan 5*. Employer must update deductions rate from £25,000 threshold after receiving start notice.
3. *UK expatriate or foreign national before has paid voluntary Class 2 NICs from abroad*. Starting 2026-27, they may need to shift to Class 3, or lose eligibility if they don’t have the required residence history.
## Action Plan
- Update payroll systems and software with the latest HMRC tools.
- Communicate to staff the Plan-5 changes so they can anticipate deduction differences.
- Revise budgeting to account for changes in tax codes recovering winter payments.
- Identify employees abroad or with residency issues and advise them on NICs options.
## Conclusion
Although these changes may seem technical, they have real cash flow and compliance effects—especially on payroll and for individuals with foreign ties. Employers should ensure systems are updated, staff are informed, and policies are aligned going into the new UK tax year on 6 April 2026.