What’s changed in the 2026/27 tax year?

The UK tax year 2026/27 runs from 6 April 2026 to 5 April 2027. Major updates include higher National Minimum Wage (and Living Wage) rates that are now effective (since 1 April 2026), big reforms to Statutory Sick Pay, and higher statutory family-leave pay rates that started from 6 April 2026. Employer National Insurance and the Employment Allowance remain unchanged. New rights have also kicked in – for example, paternity and unpaid parental leave can be taken from day one, and a new Fair Work Agency began operating in April 2026.

If you’re an employer, then these changes may mean a higher minimum wage and, therefore, higher payroll costs. This article outlines everything you need to know about what’s changed in the 2026/27 tax year.

1. National Minimum Wage and National Living Wage rates for 2026/27

The new National Living Wage (age 21+) comes in at £12.71/hour from 1 April 2026 – a 50p (4.1%) increase. Other rates from that date: age 18–20 will be £10.85 (+85p, 8.5%), and under-18 and apprentice rates have risen to £8.00 (+45p). The apprentice rate applies to apprentices aged under 19 and to those aged 19 or over in the first year of their apprenticeship – after that, they move onto the rate for their age.

Businesses should review payroll budgets early in anticipation of the next tax year. A higher minimum wage means higher payroll costs. If you haven’t already, update your payroll forecasts and ensure your accounting software reflects the new rates.

The accommodation offset (for employers providing free lodging) also increased to £11.10 per day with a weekly maximum of £77.70. If you run a small business, double-check that any part-time or young workers move onto the new pay bands on or after 1 April.

2. Statutory Sick Pay: what’s changed for employers

Statutory Sick Pay (SSP) was overhauled for 2026/27. From 6 April 2026, SSP is the lower of £123.25 per week or 80% of the employee’s average weekly earnings (the flat rate is up from £118.75). Under the new rules, SSP must be paid from the first qualifying day of sickness instead of the fourth – the three unpaid waiting days have been removed. Also, the lower earnings limit test for SSP has been scrapped, so employees are no longer excluded because of how little they earn. Now, when an employee calls in sick, SSP kicks in from the first scheduled working day of the absence.

• UK tax year dates and deadlines 2025-26
• How to check if HMRC has processed your tax return
• How to file your Self Assessment tax return

3. Statutory parental pay rates for 2026/27

In April 2026, the flat weekly rate for SMP, SPP, SNCP, SAP, ShPP, and SPBP rose to £194.32 (up from £187.18). For the first 6 weeks of maternity or adoption pay, employees still receive 90% of their average weekly earnings, with no upper limit. After that, you pay the flat £194.32 or 90% of their average weekly earnings, whichever is lower. Statutory paternity, shared parental, parental bereavement, and neonatal care pay all work on the same basis: £194.32 a week or 90% of average weekly earnings, whichever is lower.

Note that the qualifying conditions for Paternity Pay remain: 26 weeks’ service and average weekly earnings at or above the Lower Earnings Limit of £129, but paternity leave itself is now a day-one right under the Employment Rights Act.

Separately, Maternity Allowance has also risen to £194.32/week since April 2026.

4. Employer National Insurance (NI) and Employment Allowance: what’s staying the same

In contrast to last year’s big NI hikes, nothing changes for employer NIC in the 2026/27 tax year. The rate remains 15% on earnings above the secondary threshold. The secondary threshold itself is still £5,000 per year (£96/week), and the Employment Allowance remains £10,500 per year.

Many small employers will find their NIC bills are essentially identical to 2025/26 levels unless wages grow significantly.

5. NIC Lower Earnings Limit and Small Profits Threshold

The Lower Earnings Limit (LEL) for NIC has risen to £129 per week (£6,708/year). Employees earning above the LEL but below the primary threshold pay no National Insurance, but the year still counts towards their state pension. The LEL is also the earnings test for statutory maternity, paternity, adoption, and shared parental pay.

The Small Profits Threshold still applies to sole traders, but Class 2 National Insurance became voluntary in April 2024. Self-employed people with profits above the threshold now get their state pension record credited automatically, without paying anything. Those below it can still pay Class 2 voluntarily to protect their record.

6. New employment rights from April 2026

A number of new workers’ rights under the Employment Rights Act 2025 came into effect in April 2026. Notably, paternity leave and unpaid parental leave are now day-one rights. This means any new employee is immediately entitled to give notice for these types of leave from their first day at work. (Statutory Paternity Pay still requires 26 weeks’ service to qualify for pay.)

Additionally, Bereaved Partner’s Paternity Leave comes into force – this gives up to 52 weeks of unpaid leave for a partner if the baby’s mother or primary adopter dies in the first year. Employers should update staff handbooks or policies to mention these new leave rights.

Another big reform: from 1 October 2026, most claimants will have 6 months (instead of 3) to bring an employment tribunal claim. Meanwhile, the protective awards for collective redundancy breaches double (e.g. max days’ pay goes from 90 to 180), effective since 6 April 2026. Whistleblower protections also extend to cover sexual harassment disclosures since the same date.

Small employers should check that their contracts and handbooks don’t inadvertently restrict these new entitlements.

7. The Fair Work Agency: what it means for compliance

From 7 April 2026, the new Fair Work Agency began operating as a single enforcement body, initially consolidating the former HMRC National Minimum Wage enforcement team, the Gangmasters and Labour Abuse Authority, and the Employment Agency Standards Inspectorate. It will gradually take on responsibility for enforcing holiday pay and Statutory Sick Pay too, though this is being phased in – National Minimum Wage enforcement continues to be delivered by HMRC on the Agency’s behalf until April 2027, and full holiday pay/SSP enforcement is expected to build out over 2026–2027. In practice, fines or enforcement actions are likely to become more rigorous over time, especially around minimum wages and holiday pay records.

8. Capital Gains Tax changes for business owners

For business owners planning to sell assets or shares, the Capital Gains Tax (CGT) relief rates have increased again. Business Asset Disposal Relief (BADR, formerly Entrepreneurs’ Relief) and Investors’ Relief rates are 18% for qualifying disposals on or after 6 April 2026. (These rates were 10% until 5 April 2025, rose to 14% for 2025/26, and are now 18% since 6 April 2026.) This means if you sell a qualifying business or shares now, the CGT you pay is 18%, rather than the 24% higher rate. Note that 18% is also the standard CGT rate for gains falling within your basic rate band, so BADR only saves you tax where the gain takes you into a higher rate.

The BADR lifetime limit (£1m of gains) remains the same. Review any planned asset sales – higher CGT rates mean you’ll pay more tax on gains, so planning (timing, thresholds, reinvestment, etc.) is key. For example, selling shares in a qualifying company for £500k with a £300k gain would attract £53,460 tax (18% of £300k, less the £3,000 annual exempt amount).

Working-from-home tax relief – the flat-rate £6/week relief for employees – was abolished on 6 April 2026. Since the start of the new tax year, employees cannot claim this relief directly from HMRC, and it does not appear in payroll or expense systems (though employers can still pay staff up to £6/week tax-free if they choose to). Employees can still claim for the four previous tax years where they met the old conditions. And if you’re a director of your own limited company, you can still claim home office costs through the company, either £6/week as a tax-free reimbursement or actual costs. That route is unaffected.

9. Other changes to be aware of

• Employment Allowance extended eligibility: The Employment Allowance remains at £10,500 for 2026/27. Eligibility was widened from April 2025, when the £100,000 prior-year NIC cap was removed, so all eligible employers can now claim regardless of payroll size. The main exclusion is companies where the sole director is the only employee paid above the secondary threshold. – see our Employment Allowance eligibility guide.
• Tax year dates: The tax year 2026/27 is 6 Apr 2026–5 Apr 2027. (Self-assessment and PAYE deadlines remain as usual relative to these dates.)
• Furnished holiday lettings: The special tax rules for furnished holiday lettings were abolished from 6 April 2025; normal residential property rules now apply.
• VAT on electricity: VAT on domestic electricity in Great Britain drops from 5% to 0% from 1 October 2026 to 31 March 2027. Small businesses that qualify for the reduced rate and aren’t VAT registered benefit, too.

The big shifts for 2026/27 are in wages (NMW/NLW), sick pay and family-pay rates, and the new employment rights enforcement framework.

10. How to prepare your business in line with tax changes

We’re now halfway through the 2026/27 tax year, which makes this a good time to check that nothing has slipped through. Make sure your payroll software or provider has applied every change. If you run payroll in-house, pick a recent payslip and check it line by line. Spotting an underpayment now is far cheaper than having the Fair Work Agency find it later.

Keeping on top of every deadline and rule change takes time you’d rather spend running your business. Our Hassle-Free Compliance package takes care of your annual filings and keeps your company compliant, so there’s one less thing on your plate. And if you’re starting a new venture, you can register your company with Rapid Formations in minutes and get ongoing support from day one.