Compliance
UK Employers: Preparing for Payroll Changes and Benefits in Kind Updates
Major compliance overhauls are coming from HMRC affecting payroll tools, benefits in kind, student loans and NI contributions—UK employers must take action before April 2026.
By NomadicTax Research Team • 5-8 min read • March 14, 2026
## Key Payroll & Employee-Benefit Changes from HMRC
Over the past month, HM Revenue & Customs has issued several updates that UK employers need to act on now to stay compliant starting **6 April 2026** and beyond. These cover payroll software, national insurance, student loan plans, and benefits-in-kind. ([gov.uk](https://www.gov.uk/government/publications/employer-bulletin-february-2026/february-2026-issue-of-the-employer-bulletin?utm_source=openai))
### Mandatory Updates to Basic PAYE Tools (BPT)
- From **6 April 2026**, version **26.0** of BPT becomes required for UK employers using HMRC’s Basic PAYE Tools (for businesses with fewer than 10 employees). Make sure tools are updated and automatic updates turned on. ([gov.uk](https://www.gov.uk/government/publications/employer-bulletin-february-2026/february-2026-issue-of-the-employer-bulletin?utm_source=openai))n
### Student Loan Plan 5 Introduced
- A **new Plan 5** student loan repayment schedule begins **6 April 2026**, with thresholds and repayment rates aligned similarly to existing plans. Employers will receive notifications in **March 2026** for borrowers entering repayment. Until then, default to **Plan 1**. ([gov.uk](https://www.gov.uk/government/publications/employer-bulletin-february-2026/february-2026-issue-of-the-employer-bulletin?utm_source=openai))n
### Changing National Insurance & State Pension Age
- The **State Pension age** in the UK rises to **67** for those born between **6 April 1960** and **5 March 1961** — changes phased over two years. Employers must adjust NI category letters accordingly. ([gov.uk](https://www.gov.uk/government/publications/employer-bulletin-february-2026/february-2026-issue-of-the-employer-bulletin?utm_source=openai))n
- **Voluntary Class 2 National Insurance contributions abroad** removed from **2026-27** onward. To purchase voluntary Class 3 contributions if needed, individuals generally must have at least **10 years’ continuous UK residence or contribution history**. This change affects expats/non-residents abroad. ([gov.uk](https://www.gov.uk/government/publications/employer-bulletin-february-2026/february-2026-issue-of-the-employer-bulletin?utm_source=openai))
### Benefits in Kind & Payrolling Changes
- From **April 2027**, most non-salary benefits (benefits-in-kind or “BiKs”) must be included via **mandatory payrolling**. Employers may register **voluntarily** **before** 5 April 2026. After the tax year begins, voluntary registrations aren’t accepted. ([gov.uk](https://www.gov.uk/government/publications/employer-bulletin-february-2026/february-2026-issue-of-the-employer-bulletin?utm_source=openai))n
- Interim guidance is out now: employers should review “Mandatory payrolling of benefits in kind and expenses” to understand reporting changes. ([gov.uk](https://www.gov.uk/government/publications/employer-bulletin-february-2026/february-2026-issue-of-the-employer-bulletin?utm_source=openai))
## Practical Steps for UK Employers Before April 2026
- **Update payroll software**: ensure version 26.0 of BPT is in use by April. Test payroll runs with new student loan plan thresholds so deductions are accurate.
- **Review employee status and benefits offerings**: benefits shared through BiKs need to be evaluated for being reportable. If using benefits or loans/accommodation arrangements, employers should map processes to new guidance.
- **Communicate with international employees & ex-patriates**: the change in voluntary NI contributions abroad significantly affects state pension entitlement. Provide clarity on what contributions or years abroad count.
- **Prepare for notification letters**: employees entering repayment under Plan 5 student loans will get notices; ensure payroll teams anticipate and adjust accordingly.## Examples Illustrating Impact
- **Small café** with 8 employees using BPT: update now or risk incorrect payroll after 6 April.
- **Family where both parents have student loans**: under Plan 5, repayment thresholds differ — households must prepare for changes; e.g. your household earnings define plan and repayment route.
- **An expat living mostly abroad**: lacking continuous UK residence, might be led to pay Class 3 NI and have fewer pension years unless older rules preserved.## Key Compliance Risks if Ignored
- Under-withholding student loan deductions or misclassifying benefits could lead to penalties or employee claims for overpaid NI.
- Failure to register benefits in kind before deadlines may force retroactive adjustments or missed reliefs.
- Employees abroad may lose state pension rights if contribution gaps occur without clear communication.## Bottom Line
Employers in the UK have **important deadlines** arriving quickly. From payroll tool updates to national insurance reform and benefit reporting—ensure you review systems, communicate changes to staff, and comply well before April 2026. Monitoring guidance now will help avoid last-minute scrambling.