Payroll Updates for 2026–27: What UK Businesses Need to Know
The payroll landscape in the UK is undergoing significant changes for the 2026–27 tax year. These updates affect statutory payments, compliance requirements, and payroll processes for businesses of all sizes. Staying ahead of these changes is crucial to avoid penalties, maintain accurate records, and ensure smooth operations. Here’s a detailed overview of what’s new and what your business should consider.
1. Statutory Sick Pay (SSP) Reform
From 6 April 2026, Statutory Sick Pay (SSP) rules have changed significantly:
Waiting days removed – SSP is now payable from day one of sickness absence, rather than after three days.
Expanded eligibility – The lower earnings threshold has been removed, meaning more employees, including part-time and lower-paid staff, now qualify.
Updated calculation – SSP is calculated as the lower of 80% of average weekly earnings or the statutory weekly rate.
Increased rates – Statutory payment amounts have risen for the new tax year.
These changes increase payroll responsibilities and may result in higher sick pay costs. Accurate record-keeping and correct payroll configuration are now more important than ever.
2. National Minimum and Living Wage Updates
The National Minimum Wage and National Living Wage rates have increased from 1 April 2026. This affects:
Salary calculations for hourly-paid staff
Compliance with legal pay requirements
Payroll processing for salary sacrifice schemes and deductions
Employers must ensure payroll systems are updated to avoid underpayment, which could lead to enforcement action and reputational damage.
3. Stronger Enforcement: Fair Work Agency
A new enforcement body, the Fair Work Agency, launches in April 2026 with expanded powers to monitor:
Minimum wage compliance
Statutory Sick Pay (SSP)
Holiday pay
Broader employment rights
This makes accurate payroll records and compliance practices essential. Employers face increased risk of fines and enforcement actions if records are incomplete or incorrect.
4. PAYE Liability in Supply Chains
From 6 April 2026, PAYE liability in labour supply chains has been extended:
If an umbrella company fails to pay the correct tax or National Insurance contributions, liability may now fall on the recruitment agency or the end client.
Businesses using contractors via agencies or umbrella companies should review contracts, processes, and due diligence to ensure compliance.
5. Benefits in Kind (BiKs) Payrolling
Mandatory payrolling of Benefits in Kind (BiKs) has been delayed until April 2027.
However, preparation in 2026 is recommended:
Payroll systems will need to calculate tax and National Insurance on benefits in real time.
Most P11D reporting will be replaced with real-time payroll reporting.
Early adoption can simplify the transition and reduce errors.
6. Holiday Pay Accuracy
Holiday pay is under increasing scrutiny. Employers must ensure:
Accurate calculation of entitlements, including for workers with variable hours or pay
Consistent record-keeping to comply with enforcement requirements
Payroll and HR systems are fully aligned to prevent errors
Errors in holiday pay calculations are now a common source of compliance challenges, so preparation is key.
7. Why These Changes Matter
Even if your business is not a large listed company, these updates may still impact you. Larger clients and partners are increasingly demanding accurate and auditable payroll data. Compliance isn’t just about avoiding fines, it’s about maintaining trust, protecting your reputation, and ensuring smooth operations across your workforce.
The key themes for employers in 2026–27 are:
Broader statutory entitlements – More employees eligible for SSP and other statutory payments
Increased payroll costs – Due to expanded entitlements and minimum wage increases
Expanded enforcement powers – With the Fair Work Agency actively monitoring compliance
Greater supply chain liability – Especially when using contractors through agencies
Enhanced compliance scrutiny – Accurate payroll and record-keeping are no longer optional
8. How JSB Accountants Can Help
At JSB Accountants, we help businesses navigate these changes efficiently. Our services include:
Payroll compliance review – Assess your current processes against 2026–27 requirements.
System setup and configuration – Ensure your payroll software applies new SSP rules, tax codes, and minimum wage updates correctly.
Record-keeping guidance – Maintain accurate, audit-ready records for SSP, holiday pay, and benefits.
Strategic planning – Plan for BiKs payrolling in 2027, and ensure smooth transitions across supply chains.
Ongoing support – Receive updates on regulatory changes and expert advice to keep your payroll compliant and stress-free.
✅ Takeaway
Payroll in 2026–27 is more complex and more closely monitored than ever before. Early preparation, accurate systems, and professional guidance are key to staying compliant and avoiding unnecessary risk.
JSB Accountants can help your business stay ahead of payroll changes, ensure compliance, and turn complex regulatory requirements into a manageable, streamlined process.
As a family-run company, we pride ourselves on providing a bespoke service tailored to your particular needs.
Above all, our objective is to save you time, money and effort in managing your accounts, leaving you free to focus on building your business.
Remember, you’re not alone, we’re always here to help if you have an accounts problem or query
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