As with the start of any new tax year, there are the usual changes that pay professionals need to be aware of. But what else is going on in 2026 and beyond, and how can you start preparing for the future now? These key topics will be discussed in detail at the Finance, Accounting & Bookkeeping Show (FAB) on 11–12 March at NEC, Birmingham.
Transitional protections now confirmed for statutory sick pay
One of the biggest changes employers and agents need to be prepared for ahead of the 2026/2027 tax year is the changes to statutory sick pay (SSP). For the first time ever, all employees will be entitled to SSP, regardless of their level of earnings. This change has been brought about by the recently enacted Employment Rights Act 2025, and this amendment to SSP was part of the Labour Party’s manifesto to ‘‘Make work pay”.
The changes we’ll see to SSP from 6 April 2026 are as follows:
- the lower earnings limit (LEL) will be removed, allowing all employees to access SSP regardless of earnings
- SSP will be calculated as 80% of an employee’s average weekly earnings (AWE) or the current flat rate (confirmed as £123.25 from 6 April), whichever is lower
- waiting days will be eliminated, enabling eligible employees to receive SSP from the first full day of sickness absence.
What we didn’t know until late December was how that would affect anyone already off sick on 6 April. However, eligibility and transitional protections have now been confirmed.
- Employees earning below the LEL who are off sick on or after 6 April will be eligible for SSP from 6 April.
- Those serving waiting days on 6 April will receive SSP from that date onwards.
- Employees earning between £125.00 and £154.05 per week and already receiving SSP before 6 April will be transitionally protected to prevent a reduction in their SSP rate. This means they will receive the flat rate of £123.25 until they return to work, exhaust their entitlement or their contract ends.
Confirmation around the calculation of average weekly earnings and SSP was also confirmed, as:
- SSP for those earning below the flat rate will be based on 80% of their AWE, calculated over a relevant eight-week period
- payments will be rounded up to the nearest whole penny
- for linked periods of incapacity (within 56 days), the initial period’s AWE will be used for subsequent calculations.
I urge all employers and agents to ensure sick pay policies and payroll software are up to date, to align with the new rules. If you or your clients pay company sick pay, ensure relevant policies are reflected, especially if entitlement to company sick pay corresponds to an employee’s eligibility to SSP.
Mandatory payrolling of benefits in kind
As many of you will know, Mathew Akrigg, one of the policy and research officers at the Chartered Institute of Payroll Professionals (CIPP), is currently on secondment with HMRC’s policy team to help design and implement the government’s upcoming mandate for the payrolling of benefits, set to become mandatory in April 2027.
It’s an incredible opportunity for Mat personally, but also for the CIPP, to ensure pay professionals’ voices are heard regarding implementation, and that minimal administrative burden is placed with employers and agents.
One thing that is imperative to note is that, even if you’re voluntarily payrolling currently, you’ll still have work to do to ensure your payroll processes are set up correctly, come mandation in April 2027. I will be speaking about this in more detail at the Finance, Accounting & Bookkeeping Show (FAB) on 11–12 March at NEC, Birmingham.
Currently, under the voluntary scheme employers and agents simply add a taxable value to each pay period, to ensure the correct amount of income tax is paid on the relevant benefit or taxable expense throughout the year. However, when we move to the mandatory scheme, a taxable value will still have to be added, but each benefit or taxable expense will need to be connected to a specific Real Time Information (RTI) field/data item. You can review the RTI fields likely to be required here.
I implore all employers to hold conversations with benefits providers, to ensure they’re aware of the changes.
A little further ahead
Two large announcements made in the 2025 Budget in November will have an impact to payroll processes, but not until April 2029.
Self assessment income to be coded into pay as you earn (PAYE)
From April 2029, income tax self assessment (ITSA) taxpayers who also have other income paid via PAYE will be required to pay their ITSA liability throughout the tax year via the PAYE system. The government plans to consult in early 2026, and the CIPP’s policy team has been asked to contribute to this conversation. This announcement reminds me somewhat of the intention of payrolling benefits getting tax paid in real time, to close the tax gap.
Salary sacrifice pensions national insurance cap of £2,000
This announcement caused mass conversation throughout the industry, as only allowing a certain value to be contributed into pension schemes with national insurance contribution (NIC) savings could deter employees from saving over £2,000 a year into their pension. One thing it certainly would do, is increase employers’ national insurance (NI) bills.
This will, no doubt, generate additional revenue. However, it comes at a cost to the working person, particularly those who are trying to plan and save for the future by putting more of their earnings into pension schemes. Again, the government has asked the CIPP’s policy team to contribute to this conversation, and we look forward to sharing our members’ views on this policy measure.
Mandatory payrolling of benefits in kind and many other topics will be discussed at the Finance, Accounting & Bookkeeping Show (FAB) on 11–12 March at NEC, Birmingham. Book your free ticket today.
The CIPP has kicked off its new podcast with an episode featuring JP Marks, first permanent secretary and chief executive of HMRC. He shared his vision for HMRC’s Transformation Roadmap, offering insights into how the organisation is evolving to build a more modern, transparent and trusted tax system. You can watch the episode here.
