A New Payroll Year

What employers need to know

As the payroll year end approaches, employers must complete a number of tasks to comply with HMRC regulations and ensure that they are claiming the correct allowances and applying updated payroll rules. This article outlines the key actions required at the start of the 2026/27 tax year and highlights the main payroll changes coming into effect.

Payroll year end

Once your final pay run of the tax year has been completed, you will be able to finalise your payroll for the 2025/26 tax year. Your payroll year end must be completed and submitted to HMRC by 19 April 2026 to remain compliant and avoid potential penalties.

The payroll year end process involves submitting your final Full Payment Submission (FPS) to HMRC, which confirms each employee’s total pay and tax deductions for the year, along with any employer liabilities reported throughout the tax year.

As part of this process, P60 forms must also be prepared for each employee and issued to employees no later than 31 May 2026, either electronically or as a paper copy.

Employment allowance

The Employment Allowance helps eligible businesses reduce their Employer National Insurance liability. Employer National Insurance is calculated based on employee earnings and represents an additional cost to the employer on top of employees’ gross wages.

For the 2026/27 tax year, employers can claim relief of up to £10,500 per year, before they start to pay Employer National Insurance on their employees’ wages.

However, some organisations are not eligible to claim the allowance, including:

• Public bodies (such as public schools, hospitals, and police services)

• Businesses where the only employee paid through the payroll is a sole director

To claim the allowance, you will typically find the option within your payroll software settings, usually under the tax or HMRC submissions section. Claiming the allowance generates an Employer Payment Summary (EPS) submission to HMRC.

If you claimed Employment Allowance in the 2025/26 tax year, you must apply to claim it again for 2026/27 before your first payroll submission. Any unused portion of the allowance cannot be carried forward and is therefore lost at the end of the tax year.

Changes to employees’ tax codes

Employee tax codes should be reviewed regularly, but it is particularly important to check them at the start of a new tax year, when changes are most likely to occur. Tax codes may change for several reasons, including updates to personal allowances or adjustments made by HMRC. If an employee is operating under the incorrect tax code, it can lead to overpayments or underpayments of tax.

To check for updates issued by HMRC, log into your HMRC PAYE Online account and review the “Tax Code Notices” section.

National minimum wage

The National Minimum Wage rates increase from April 2026. Employers must ensure all employees are paid at least the minimum rate applicable to their age group.

Category	2025/26	2026/27
Apprentice	£7.55	£8.00
Under 18	£7.55	£8.00
Age 18 - 20	£10.00	£10.85
Age 21 and over	£12.21	£12.71

Statutory sick pay

There are also changes to Statutory Sick Pay (SSP). Previously, employees had to wait three qualifying days before SSP was payable, however, under the updated rules, employees are eligible to receive SSP from the first day of sickness absence.

For the 2026/27 tax year, SSP is calculated as the lower of £123.25 per week, or 80% of the employee’s average weekly earnings. The daily rate of SSP depends on the number of qualifying working days per week.

For example:

• An employee working 5 days per week would receive £123.25 ÷ 5 = £24.65 per day

• An employee working 1 day per week would receive £123.25 ÷ 1 = £123.25 for that day

This ensures that employees receive the same maximum weekly entitlement, regardless of how many days they work each week.

Statutory maternity and paternity pay

Statutory maternity and paternity payments also see an increase in the maximum weekly payment rate from April 2026.

Employees on Statutory Maternity Leave receive 90% of their average weekly earnings for the first 6 weeks. After this period, or for Statutory Paternity Pay, employees receive the lower of £194.32 per week (increased from £187.18), or 90% of their average weekly earnings.

From April 2026, Statutory Paternity Leave becomes a day-one employment right, meaning eligible employees can access paternity leave from the start of their employment. However, qualifying conditions for statutory payments still apply.

Final thoughts

Preparing for the new payroll year is essential for ensuring compliance with HMRC regulations and avoiding costly penalties. Employers should take time to review their payroll software settings and ensure all allowances and statutory payment changes have been correctly implemented before running their first payroll of the new tax year.

Contact us if you have any payroll related questions that we can assist with.