UK Payroll and tax year-end: What employers need to know for 2026

The UK tax year ends on 5 April every year. For employers, this isn't just an administrative milestone; this year, it coincides with some of the most significant changes to employment law, all taking effect within days of each other.

The cost implications are real, and the legal exposure for getting it wrong could be very detrimental.

Here's everything you need to prepare.

What’s changing in April 2026?

1. National minimum wage increases

From 1 April 2026, the National Living Wage (for those aged 21 and over) increases to £12.71 per hour. Rates for younger workers and apprentices are also rising significantly. You must update your pay scales to ensure all staff remain at or above the legal minimum, especially for those in salary sacrifice schemes.

Note: For apprentices aged 19 and over, the rate from 1 April 2026 is £8/hr in the first year of apprenticeship. Once past first year of apprenticeship, the rate follows the age bands in rest of table.

What to do: Ask your payroll provider or HR team to confirm pay rates have been updated for all staff before 1 April. If you have salaried employees working variable hours, check that annualised pay doesn't fall below the hourly minimum.

2. Major reforms to Statutory Sick Pay (SSP)

Sick pay now starts from day one, and covers more of your workforce. From 6 April 2026, the Employment Rights Act 2025 introduces two major changes to SSP that will impact your bottom line and absence tracking:

• Day-one eligibility: The previous three-day "waiting period" is removed. SSP is now payable from the first day of sickness.
• The Lower Earnings Limit is removed. SSP previously only applied to employees earning above £125 per week. That threshold is scrapped. All employees now qualify for SSP regardless of how much they earn, bringing many part-time and lower-paid workers into the scheme for the first time.
  
  

What to do: Review your sickness absence levels now and model the cost impact. Ensure your payroll software is updated to handle day-one SSP and the new earnings-based calculation. Update any employment contracts or staff handbooks that reference the old waiting period or earnings threshold — those clauses are now unlawful.

3. New "Day One" employment rights

From 6 April 2026, employees can take statutory paternity leave and unpaid parental leave from their first day of employment (the threshold for pay remains the same). The previous qualifying periods (26 weeks for paternity leave, one year for parental leave) are removed. This means employees can request or give notice for the following from their first day of employment:

• Paternity leave
• Unpaid parental leave
• Bereaved partner's paternity leave (up to 52 weeks if the primary carer dies)
  
  

What to do: Update employment contracts and family leave policies. Make sure line managers understand the new entitlements so they don't incorrectly refuse requests from new starters.

4. Expansion of the EMI share scheme

For growing businesses, the Enterprise Management Incentive (EMI) scheme thresholds are expanding. The gross assets limit rises to £120 million and the employee limit to 500. This allows more medium-sized companies to offer tax-advantaged share options to attract and retain top talent.

Critical deadlines for the 2025/26 tax year-end

Staying on top of these dates is the best way to avoid late-filing penalties and keep your compliance on track.

What you should be doing now

Follow this checklist to ensure your data and processes are ready for the transition.

• Clean your employee data: Verify employee National Insurance numbers and addresses. Incorrect data is a leading cause of rejected HMRC submissions.
• Check your payroll is ready for the SSP changes. The new SSP calculation rules are the most technically complex change. Confirm with your payroll provider that their software is updated and tested before 6 April — not on 6 April.
• Submit your final FPS and EPS: Your last FPS of the tax year must be submitted on or before your employees' final pay date. Ensure it is flagged as the final submission of the year. Final EPS for 2025/26 tax year is due by 19 April and needs final indicator on.
• Issue P60s to all employees: Every employee on your payroll on 5 April must receive a P60 by 31 May. Failure to provide one can result in a fine of up to £3,000 per occurrence.
• Budget for cost increases: Account for higher employer National Insurance contributions (now at 15% above the reduced £5,000 threshold) and the new SSP requirements in your 2026 forecasts.
• Update tax codes: HMRC will issue new tax code notifications (P9 forms) before the start of the new tax year. Ensure your system applies these from 6 April.
• Review benefits in kind: If you provide benefits like company cars or private medical insurance, you must submit P11D forms by 6 July.

Take the complexity out of UK payroll

Remote handles compliant UK payroll, including the April 2026 legislative changes, so you're not managing the complexity yourself.

Speak to a Remote specialist to learn more about how you can streamline your UK payroll today!

This article is for informational purposes only and does not constitute legal or tax advice. Always consult a qualified professional for guidance specific to your circumstances.